EUROPEAN STRATEGIC ENERGY AND DEFENCE-INDUSTRIAL INTELLIGENCE REPORT | 2026–2031 OUTLOOK

Scope: Assessment of the European Commission’s 28 October 2026 High-Level Dialogue on oil refining, covering the EU’s strategic fuel dependence, industrial transformation, military logistics, regulatory investment conditions and the distinct implications for Italy, France, Germany and the United Kingdom, with a five-year forward horizon and a 15–20-year investment-policy perspective.

Executive Summary / BLUF

The European Commission’s decision to recognise domestic refining as a strategic asset marks a consequential change in European industrial-security policy, but not yet a reversal of its decarbonisation commitments or an adopted programme of refinery protection.

The Commission confirms that European refineries supply approximately 70% of jet fuel and 85% of diesel consumed in Europe, while the sector produced 543.7 million tonnes of petroleum products in 2024.

Commissioner Dan Jørgensen disclosed that approximately 25% of EU refineries closed over the preceding two decades, reducing aggregate refining capacity by around 10%. The difference between closures and lost capacity implies significant consolidation, rather than an equivalent reduction in every category of output.

The immediate policy priority is higher production of diesel and jet fuel. Yet the Commission had already reported European refineries operating near maximum capacity in September 2026, limiting the scope for rapid, low-cost increases.

The strategic significance lies in the participation of Defence Commissioner Andrius Kubilius and NATO: refining is now being considered alongside military fuel availability, infrastructure resilience, crisis distribution and eastern-flank reinforcement.

Eurostat’s 2024 balances establish a continuing structural exposure: 15.7 Mtoe of net extra-EU gas/diesel oil imports and 11.0 Mtoe of net kerosene-type jet fuel imports.

Italy has exceptional strategic relevance because of its major Mediterranean refining system, petrochemical and port infrastructure, and ongoing conversion investments. Its most valuable assets must be assessed by usable product output, logistics connectivity and adaptability, not merely crude-processing capacity.

The principal decision is whether European authorities will translate this recognition into a credible 15–20-year framework for investment, capacity retention, renewable-fuel integration, defence procurement and infrastructure resilience.

Without those instruments, commercial rationalisation can continue even while public institutions describe refining as strategically indispensable.

Principal judgment: The strategic rationale is established; the durability, financing and industrial consequences of the policy pivot remain unresolved.

Beyond Hormuz and Bab el-Mandeb: Reengineering the Global Oil Transit System

Europe’s Refining Reversal: The Strategic Cost of Losing the Capacity to Produce Fuel

The European Commission’s decision of 28 October 2026 to bring the refining industry into a dialogue jointly chaired by Energy Commissioner Dan Jørgensen and Defence Commissioner Andrius Kubilius marks a change in how Brussels values industrial capacity. Refining is no longer being assessed solely against declining fossil-fuel demand and decarbonisation costs, but against Europe’s ability to sustain civilian transport, industrial production and military operations. NATO’s participation gives that reassessment a defence dimension. Yet the Commission has recognised an asset without establishing how its strategic value should be financed. With approximately 70% of European jet fuel and 85% of diesel supplied by EU refineries, the question is no longer whether refining matters, but whether Europe can preserve the capabilities it needs without subsidising obsolete capacity or compromising its energy transition. The difference will determine investment, import dependence and military resilience for years.

Europe has rediscovered the value of capacity after reducing it

The Commission’s figures describe the contradiction confronting European policymakers. Commissioner Jørgensen reported that approximately 25% of EU refineries closed over the preceding two decades, while total refining capacity declined by around 10%. The difference reflects industrial consolidation: fewer installations, with a smaller proportional loss of aggregate processing capacity. It does not establish that environmental policy caused every closure, nor that preserving every installation would have been economically justified.

Nevertheless, the consequences of contraction must now be evaluated against requirements that ordinary refinery profitability does not fully capture. A plant can be commercially marginal while retaining strategically valuable processing flexibility, geographical access or distribution infrastructure. Once closed, those capabilities may be difficult to restore because equipment, technical personnel, permits and industrial supply relationships cannot necessarily be recreated within the duration of a geopolitical crisis.

The Commission’s change in language follows a specific market sequence. On 29 September 2026, its Oil Coordination Group reported that European refineries were operating near maximum capacity while diesel and aviation-fuel prices remained elevated. On 22 October, the Commission confirmed continued market tightness but no physical shortage within the Union. Six days later, refining became the subject of the first high-level dialogue involving both energy and defence portfolios.

That sequence matters. Brussels is asking industry to increase output when existing installations have limited spare operating capacity. Marginal adjustments may improve production, but substantial increases require investment in processing equipment, hydrogen systems, maintenance and logistics. Political recognition can change industrial expectations; it cannot immediately create additional diesel or jet fuel.

The numbers expose a product-security problem, not simply an oil shortage

According to Eurostat, the EU produced 543.7 million tonnes of oil equivalent (Mtoe) of petroleum products in 2024. Germany accounted for 99.0 Mtoe, Italy for 68.8 Mtoe, Spain for 64.3 Mtoe and the Netherlands for 57.1 Mtoe. Together, those four countries represented approximately 53.2% of European production.

The composition is more revealing than the total. Gas and diesel oil accounted for 215.7 Mtoe, compared with 104.3 Mtoe of motor gasoline, 53.1 Mtoe of fuel oil and 41.6 Mtoe of naphtha. Despite this substantial domestic production, the Union remained a net importer of 15.7 Mtoe of gas/diesel oil and 11.0 Mtoe of kerosene-type jet fuel in 2024, while exporting a net 43.3 Mtoe of gasoline.

Europe therefore has not merely a refining-capacity problem, but a mismatch between the products its industrial system manufactures and those its economy requires. A gasoline surplus cannot automatically cover a diesel deficit, and greater crude throughput does not guarantee proportionately higher aviation-fuel output. Refinery configuration, conversion equipment, hydrogen availability and fuel-quality specifications determine the quantities that can actually be delivered.

The upstream figures expose a second constraint. In 2024, the EU imported 471.3 million physical tonnes of crude oil against indigenous production of only 15.5 million tonnes. The United States supplied 70.0 million tonnes, Norway 65.9 million, Kazakhstan 52.4 million and Iraq 28.5 million.

Domestic refining consequently reduces dependence on imported finished fuels without eliminating dependence on international crude markets. The strategic objective cannot be complete petroleum self-sufficiency. It must be the ability to maintain essential fuel supplies through diversified feedstocks, adaptable processing, accessible inventories and functioning distribution networks.

NATO’s involvement changes the economics of refining

Defence Commissioner Andrius Kubilius introduced an issue that commercial fuel markets cannot resolve alone: military demand can increase rapidly at locations where normal distribution systems were not designed to deliver exceptional volumes.

NATO operates a petroleum infrastructure system extending approximately 10,000 kilometres across twelve Allied countries, with aggregate storage capacity of around 4.1 million cubic metres. Its Central Europe Pipeline System includes approximately 5,300 kilometres of pipelines connecting Belgium, France, Germany, Luxembourg and the Netherlands, together with military depots, civilian facilities, airports and refineries.

The geographical concentration explains why the October dialogue also raised the possibility of extending relevant infrastructure towards NATO’s eastern flank. Such an extension has not been established as an approved construction programme, but the underlying question is operational: whether available fuel can reach military consumers at the required rate during mobilisation.

The EU’s emergency-stock framework requires member states to maintain oil stocks equivalent to the greater of 90 days of net imports or 61 days of consumption under Council Directive 2009/119/EC. That obligation does not mean European armed forces possess 90 days of operational fuel endurance. Stocks may be held as crude rather than finished products, may be geographically distant from demand or may depend on infrastructure that becomes unavailable.

This is where the commercial and military calculations diverge. Refiners invest according to expected margins and demand; defence authorities require assured availability under exceptional conditions. If governments want production capacity, priority access or distribution infrastructure maintained primarily for security, they must define the service, establish who procures it and determine who pays.

Without that mechanism, NATO can recognise a logistical requirement while commercial operators continue to close facilities whose strategic value generates no corresponding revenue.

Italy demonstrates why conversion and capacity retention are different decisions

Italy illustrates both the industrial potential and the contradictions of Europe’s refining transformation. Eni’s conventional system includes Sannazzaro, Taranto and Livorno, alongside its 50% interest in Milazzo. Venice and Gela provide established biorefining capacity, while major conventional operations continue at Sarroch under Saras, controlled by Vitol.

The scale and configuration of these assets matter more than their number. Sarroch processes approximately 300,000 barrels per day, has a reported Nelson Complexity Index of 11.7 and can handle a broad range of crude grades. Sannazzaro possesses conventional capacity of approximately 180,000 barrels per day, while Taranto operates at approximately 104,000 barrels per day and connects to the Val d’Agri production system through a 137-kilometre pipeline.

Their strategic value is different from that of facilities undergoing complete conversion. Eni’s Sannazzaro project envisages 550,000 tonnes per year of renewable-feedstock capacity by 2028, with the company explicitly stating that existing conventional-fuel production capacity will not be reduced. Livorno, by contrast, is being transformed into a biorefinery with approximately 500,000 tonnes of planned annual capacity and a December 2026 start-up target.

Eni also plans to expand Venice to 600,000 tonnes of total annual capacity in 2027 and develop a 500,000-tonne biorefinery at Priolo with Q8 Italia, scheduled for 2028. Those figures represent announced project capacity, not verified future output.

The distinction is decisive. Adding renewable fuels while retaining conventional production preserves a broader range of industrial options. Replacing conventional refining with specialised biorefining may preserve employment, infrastructure and technical expertise but eliminate processing capabilities that remain relevant to national supply security.

Italy should therefore assess Sannazzaro, Taranto, Livorno, Venice, Gela, Milazzo, Priolo and Sarroch according to their actual product output, processing flexibility, feedstock resilience and logistics connections. A nominal tonne of renewable-feedstock capacity is not equivalent to a tonne of crude-processing capacity, and neither guarantees a particular quantity of military-compatible fuel.

Europe’s climate legislation creates demand but does not guarantee domestic production

Regulation (EU) 2023/2405, establishing ReFuelEU Aviation, requires sustainable aviation fuels to account for at least 2% of supplied aviation fuel from 2025 and 6% from 2030, with synthetic-fuel requirements beginning in the 2030–2031 compliance period. FuelEU Maritime similarly requires a 6% reduction in the greenhouse-gas intensity of covered onboard energy from 2030.

These regulations create investment incentives for alternative fuels. They do not guarantee that the resulting products will be manufactured inside the Union, nor do they ensure that existing conventional refining capabilities will remain available during the transition.

Hydrotreated renewable diesel and HEFA aviation fuels depend on eligible biological feedstocks, hydrogen and specialised processing. Synthetic hydrocarbons depend on electricity, hydrogen, carbon sources and capital-intensive conversion equipment. The development of these pathways can diversify Europe’s fuel supply, but it can also replace crude-import dependence with new dependencies on internationally traded feedstocks or renewable-fuel imports.

The financial framework is equally fragmented. The EU Emissions Trading System’s revised cap is designed to reduce emissions from covered sectors by 62% by 2030 relative to 2005. The Clean Industrial Deal State Aid Framework, adopted in June 2025, facilitates specified industrial decarbonisation investments but is scheduled to run only until December 2030.

Neither instrument constitutes a general financial guarantee for strategic conventional refining capacity. Industry’s request for 15–20 years of investment visibility therefore exposes a mismatch between long-lived industrial assets, increasingly demanding climate obligations and the absence of an integrated security-capacity mechanism.

The objective should not be to suspend environmental rules for twenty years. It should be to establish predictable treatment of investments while defining which production and distribution capabilities governments are prepared to procure or support for identifiable security purposes.

The next 24 months will determine whether recognition changes investment

The European Commission’s refining initiative should be judged between late 2026 and October 2028 by decisions rather than declarations. Its intended technical follow-up and transformation roadmap must establish whether Europe will identify critical fuel-production capabilities, determine operational requirements with NATO and national authorities, and create legally workable mechanisms for investment and availability.

Italy’s announced projects at Livorno, Venice, Sannazzaro and Priolo provide early industrial tests, but commissioned renewable capacity alone will not establish whether the conventional capabilities needed for secure diesel and aviation-fuel supply have been preserved. France and Germany face related questions through their refining systems and connections to NATO’s Central Europe Pipeline System. The United Kingdom, outside EU industrial regulation but inside NATO, offers a warning: Grangemouth ceased refining in 2025, while Lindsey also ceased operations following financial distress, demonstrating how domestic processing can disappear while fuel markets continue to function through imports.

The cost of inaction will not necessarily appear immediately as empty fuel tanks. It will first emerge in deferred investment, reduced processing flexibility, diminished geographical production options and greater dependence on international product markets. Refining companies will bear the commercial costs of uncertain investment conditions; transport operators and industrial consumers will remain exposed to fuel-price and supply disruption; national governments will retain responsibility for emergency stocks and defence procurement; and taxpayers may eventually face higher costs if strategically valuable infrastructure must be reconstructed after closure.

The October dialogue has changed the Commission’s assessment of refining. It has not yet changed the economic conditions under which individual plants survive.

Europe’s central decision is not whether to preserve its historical petroleum industry. It is whether to pay for the specific industrial capabilities it expects to remain available when ordinary markets cannot guarantee supply.

Hormuz Bypasses: Oil Routes That Relocate the Chokepoint

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Navigational Index

Pillar I — Europe’s Refining Dependency and the Return of Industrial Security

• Chapter 1 — The Brussels Policy Pivot of 28 October 2026 : Institutional chronology, Commission statements, NATO participation, military requirements and the political-economic significance of the strategic dialogue.
• Chapter 2 — European Refining Capacity, Product Balances and External Dependence : Refining geography, historical closures, diesel and jet-fuel production, crude imports, product trade, consumption patterns and the distinction between nominal capacity and secure supply.
• Chapter 3 — Civilian and Military Fuel Security Under Stress : Aviation, road freight, defence logistics, strategic reserves, supply disruption, military surge requirements, distribution infrastructure and crisis scenarios.

Pillar II — Industrial Transformation, Investment Economics and National Strategic Assets

• Chapter 4 — Refinery Operations, Production Flexibility and Short-Term Market Intervention : Crude selection, refinery configuration, middle-distillate yields, maintenance, hydrogen, utilities, bottlenecks, fuel standards and realistic output expansion.
• Chapter 5 — Biofuels, E-Fuels and the Economics of Strategic Conversion : Hydrotreated renewable fuels, sustainable aviation fuels, synthetic hydrocarbons, feedstock availability, electricity requirements, investment costs and pathways for combining decarbonisation with fuel security.
• Chapter 6 — Italy’s Refining System: Industrial Assets, Conversion and Closure Exposure : Sannazzaro, Taranto, Livorno, Venice, Gela, Milazzo, Priolo and Sarroch; company strategy, production characteristics, maritime logistics, investment commitments and asset-specific strategic assessments.
• Chapter 7 — France, Germany and the United Kingdom: Different National Models of Fuel Security : Comparative refinery economics, transport dependency, defence logistics, national industrial policies, infrastructure vulnerabilities and the constraints of EU–NATO coordination.
• Chapter 8 — Refining, Nuclear Energy, Semiconductors and Steel: The Cost of Strategic Reassessment : Comparison of industrial-policy assumptions, production losses, technology dependence, capability retention, capital allocation and the economic costs of rebuilding strategic industrial capacity.

Pillar III — Strategic Autonomy, Regulatory Credibility and the 2031 Outlook

• Chapter 9 — Regulatory Architecture and the 15–20-Year Investment Horizon : EU climate legislation, emissions costs, sustainable-fuel mandates, state-aid constraints, financing conditions, energy prices, investment visibility and institutional responsibility.
• Chapter 10 — European Defence Fuel Sovereignty and Infrastructure Resilience : Military demand, NATO logistics, strategic stocks, distribution corridors, pipelines, ports, fuel interoperability and defence-related industrial planning.
• Chapter 11 — Competing Industrial Pathways, Risks and Early-Warning Indicators : Coordinated capacity retention, selective conversion, continued market-led closures, geopolitical disruption, investment delays and evidence-based five-year scenarios.
• Chapter 12 — Strategic Policy Options and Final Net Assessment : Institutional choices, implementation responsibilities, investment conditions, decision thresholds, economic trade-offs and the requirements for a durable European refining strategy.

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Saudi Arabia’s Two-Front Fiscal Test: War Risk, Oil Corridors and the Repricing of Vision 2030

Master Abstract

A change in strategic recognition, not yet in binding policy

The first High-Level Dialogue with Europe’s oil refining industry, convened in Brussels on 28 October 2026 under Commissioners Dan Jørgensen and Andrius Kubilius, represents an important institutional acknowledgement that Europe’s energy transition cannot be evaluated independently of its present industrial and military fuel requirements. The participation of NATO is especially consequential because it places the continuity of fuel manufacturing and distribution within the framework of European defence readiness, rather than treating refining exclusively as a commercially exposed activity destined for gradual contraction.

The Commission’s own figures establish the scale of the problem. European refineries provide approximately 70% of jet fuel and 85% of diesel consumed in Europe. Although the Union has reduced and diversified some aspects of its external energy dependence, its military forces, commercial aviation, road freight and substantial portions of industrial logistics remain reliant on liquid fuels whose availability cannot be replaced immediately by electrification or alternative propulsion. The Commission’s announcement explicitly combines increased short-term output from existing assets with a future joint transformation roadmap covering biofuels and e-fuels. These are documented policy intentions, not yet binding investment decisions. Commission launches High-Level Dialogue with the European oil refining sector — European Commission — Oct 2026 Energy+1

The industrial contradiction behind the new policy

The fundamental contradiction is that Europe is seeking to safeguard productive assets after an extended period during which those same assets faced declining long-term demand expectations, high operating costs, international competition and substantial uncertainty over future investment returns. Commissioner Jørgensen’s statement that one-quarter of EU refineries closed over approximately twenty years, while aggregate capacity declined by roughly one-tenth, identifies a sustained process of consolidation. It does not, on its own, establish how much of that contraction was caused by EU climate legislation rather than market forces, refinery economics or international competitive pressures. That causal distinction is necessary before assigning responsibility for past closures or calculating the cost of an industrial-policy reversal.

More importantly, maintaining domestic refining capacity and achieving genuine energy autonomy are not synonymous. Europe remains heavily dependent on imported crude oil. Refining therefore reduces dependence on foreign suppliers of finished fuels while preserving substantial exposure to international crude prices, maritime transport, geopolitical disruption and imported processing inputs. A credible strategy must consequently distinguish three forms of security: access to crude and alternative feedstocks, the domestic ability to manufacture the required fuel specifications, and the physical ability to deliver those fuels to civilian and military consumers during a crisis. Audiovisual Service+2

Defence logistics transforms the strategic calculation

The defence dimension creates a particularly difficult investment problem. Peacetime military fuel consumption does not provide a sufficient commercial demand signal for maintaining all the production, distribution and storage capabilities potentially required during large-scale mobilisation. Commissioner Kubilius referred to NATO’s requirement, under its force model, to move and sustain 100,000 troops during the first ten days of a military crisis. He also identified fuel-production capacity, access to supplies, infrastructure protection and potential extension of Central European pipeline capabilities towards the eastern flank as relevant priorities. These statements demonstrate institutional awareness of the operational problem, but they do not provide a verified public estimate of total wartime diesel or jet-fuel requirements.

This distinction has direct economic consequences. If European governments wish to retain industrial capacity beyond what normal commercial demand justifies, they must specify the public security service being purchased or guaranteed. Possible mechanisms include strategic reserve arrangements, long-term supply contracts, infrastructure investments and narrowly defined capacity-availability obligations. Such measures would require explicit financing, performance criteria and alignment with competition, procurement and environmental rules. Without them, the newly recognised defence value of refining remains insufficient to change individual refinery investment decisions. Audiovisual Service+1

Italy as a decisive test of European industrial coherence

Italy provides a particularly significant test because its refining system combines substantial conventional capacity, Mediterranean port access, industrial integration and an expanding renewable-fuels strategy. Eni’s conventional system includes Sannazzaro, Taranto and Livorno, together with its interest in Milazzo. The wider Italian system includes Sarroch, now controlled by Vitol through Saras, and strategically relevant installations in Sicily. Eni has also identified conversion projects at Livorno, partial conversion at Sannazzaro and new biorefining investment at Priolo. These developments make it essential to distinguish conventional refinery capacity from renewable-fuel production and to assess whether conversion preserves, replaces or reduces the ability to produce fossil-derived middle distillates.

Italy’s strategic value cannot be established from aggregate capacity alone. The relevant measures include diesel and jet-fuel output, operational flexibility, access to multiple crude grades, port and pipeline connectivity, feedstock resilience and the economic sustainability of individual installations. The assessment must also separate announced conversion capacity from commissioned production and operating performance. The importance of an industrial installation to national supply does not automatically establish its probability of survival, nor does an announced conversion establish that future defence requirements can be satisfied. Our work in Italy — Eni — official corporate disclosure Eni+1

The conditions for a durable policy settlement

The strongest interpretation of the October dialogue is not that Europe intends to restore the historical petroleum economy, but that the Commission recognises a mismatch between the rate at which conventional industrial capabilities can be lost and the rate at which substitutes can become commercially and operationally available. The immediate crisis increases the political urgency, while the investment horizon extends far beyond the current oil-price cycle. The durability of the initiative will therefore depend on whether European institutions can establish measurable fuel-security requirements, compatible transition pathways, investable regulatory conditions and financial mechanisms that reward capabilities markets would otherwise retire.

This assessment identifies three plausible trajectories: coordinated retention and conversion, selective adaptation combined with continued rationalisation, and a dialogue that produces limited structural change. The currently documented record supports the existence of political recognition and an intended roadmap, but does not yet establish which trajectory will prevail. The decisive evidence will consist of formal commitments, operational fuel-security assessments, commissioned projects and revised investment decisions—not the number or prominence of future policy declarations.

Key Evidence Table

The table distinguishes historical statistical evidence, official institutional statements and announced company plans.

Indicator	Value/status	Reference date	Definition/scope	Issuer	Exact source
First High-Level Refining Dialogue	Convened; NATO participated	28 Oct 2026	EU institutional dialogue	European Commission	Dialogue announcement
EU domestic refinery share of jet fuel	Approximately 70%	Commission baseline, 2026	Share of European consumption attributed to EU refineries	European Commission	European refining
EU domestic refinery share of diesel	Approximately 85%	Commission baseline, 2026	Share of European consumption attributed to EU refineries	European Commission	European refining
EU petroleum-product production	543.7 million tonnes	2024	Aggregate petroleum-product refinery output	European Commission	European refining
Refinery closures	Approximately 25%	Roughly previous 20 years	Commissioner’s reported change in refinery count	European Commission	Jørgensen press remarks
Refining-capacity decline	Approximately 10%	Roughly previous 20 years	Commissioner’s reported aggregate reduction	European Commission	Jørgensen press remarks
Extra-EU net imports: gas/diesel oil	15.7 Mtoe	2024	Net petroleum-product trade balance	Eurostat	Oil and petroleum products, p. 6
Extra-EU net imports: kerosene-type jet fuel	11.0 Mtoe	2024	Net petroleum-product trade balance	Eurostat	Oil and petroleum products, p. 6
EU oil emergency-stock requirement	Greater of 90 days of net imports or 61 days of consumption	Applicable framework	Statutory minimum; not military endurance	European Commission, Directive 2009/119/EC	Security of oil supply
NATO force-mobility planning reference	100,000 troops within first 10 days	Stated 28 Oct 2026	Commissioner Kubilius’s description; not fuel tonnage	European Commission	Kubilius press remarks
Sarroch refining capacity	Approximately 15 Mt/year; 300,000 b/d	Corporate disclosure accessed Oct 2026	Crude-processing capacity, not diesel output	Saras	Company profile

The 70% and 85% figures are Commission-reported domestic-supply shares, not calculated military self-sufficiency rates. Mtoe means million tonnes of oil equivalent; it cannot be treated as an identical quantity in physical tonnes without an appropriate conversion. The 2024 Eurostat balance is a historical baseline, not an estimate of the October 2026 disruption.

The Strategic Supply Structure

The most important distinction is between the ability to manufacture liquid fuels within Europe and the capacity to remain supplied during a simultaneous disruption of imported crude oil, imported finished products, maritime transport and energy infrastructure. The first can be measured through refinery output and conversion capability. The second requires geographically resolved inventories, feedstock sourcing, spare capacity, transport capacity and consumption under stress.

A further constraint is already visible in the Commission’s own reporting. On 29 September 2026, its Oil Coordination Group described European refineries as operating near maximum capacity. On 22 October it reported continued tightness in diesel and jet-fuel markets, but no physical shortage in Europe at that point. These observations mean that the request for higher immediate output must be tested against actual spare processing capacity, refinery configuration and maintenance restrictions. It cannot be treated as evidence that large unused production volumes are available. Oil Coordination Group: Continued concern about prices while supply remains stable — European Commission — Sep 2026 Oil Coordination Group discusses EU fuel market developments — European Commission — Oct 2026 Energy+1

Competing Industrial Pathways

The available evidence supports three distinguishable pathways. They are not assigned numerical probabilities because the currently documented record does not establish a defensible statistical basis for such estimates.

Hypothesis	Diagnostic support	Disconfirming evidence	Indicators	Current standing
H1 — Strategic retention and coordinated transformation	Defence involvement, Commission recognition of strategic refining, intended roadmap	No verified EU-wide binding capacity-retention instrument or comprehensive funding framework from the dialogue	Formal roadmap, contracts, capacity-retention measures, financed infrastructure	Institutionally plausible; implementation unproven
H2 — Selective adaptation and continued rationalisation	Documented refinery consolidation, high operating costs, emerging renewable-fuel investments	Strong security-driven commitments could alter private closure economics	Site conversions, closures, project commissioning, product balances	Consistent with observed industrial developments
H3 — Crisis-driven dialogue without durable policy change	Immediate emphasis on prices; refinery operating constraints; unresolved long-term investment framework	Continued technical engagement and incorporation of defence objectives could produce binding measures	Absence of follow-through, further closures, delayed investment, no procurement commitments	Material policy risk; not an established outcome

These pathways should be evaluated against outcomes rather than political declarations. A transformation roadmap alone would not substantiate H1 unless it changed investment conditions and preserved the capabilities required for security. Conversely, continued closure of commercially obsolete installations would not necessarily contradict a successful strategy if other assets demonstrably provided sufficient resilient, adaptable fuel supply.

Principal Gaps and Watch Indicators

Consequential information gap	Record or observation required	Decision significance
EU-wide military diesel and aviation-fuel requirements under mobilisation	Authorised NATO/member-state planning disclosures or aggregated capability requirements	Determines how much productive and distributive capacity requires strategic protection
Actual spare middle-distillate production capability	Verified refinery utilisation, configuration and product-yield data	Tests the feasibility of short-term output increases
Physical coverage of military and civilian priority stocks	Applicable national stock reports, product-level inventories and distribution access data	Distinguishes nominal stockholding from usable crisis endurance
Concrete commitments following the dialogue	Published Commission roadmap, subsequent legislative or financial proposals	Establishes whether strategic recognition becomes executable policy
Financial viability of refinery retention and conversion	Company investment decisions, operating economics and documented funding arrangements	Identifies which assets remain investable under alternative policy trajectories
Italy’s facility-level closure and conversion exposure	Operator disclosures, permitting decisions, investment commitments and production changes	Supports defensible site-specific risk classifications
Defence-related pipeline and distribution resilience	EU military-mobility instruments, competent NATO disclosures and approved infrastructure projects	Identifies whether refining capacity can reliably supply threatened regions

The first policy milestone is the technical follow-up to the October meeting and the Commission’s announced intention to reconvene in early 2027. The material test is whether those discussions establish measurable production-security objectives, identify the responsible institutions and provide a credible financing or regulatory framework for long-life industrial investment. Audiovisual Service+1

Preliminary Net Assessment

The 28 October 2026 dialogue establishes a shift in the Commission’s stated industrial-security priorities. It does not yet demonstrate an equivalent change in binding policy, procurement obligations or refinery investment economics.

The central proposition is that Europe’s refining capacity possesses a strategic value not fully captured by normal commercial margins. That proposition is strongest for facilities capable of reliably producing large quantities of defence-relevant middle distillates, accessing diversified feedstocks and supplying geographically significant transport and military logistics networks.

However, the same evidence exposes the limits of a purely capacity-oriented response. Europe cannot eliminate its dependence on international petroleum markets simply by retaining more refining equipment, while large-scale renewable-fuel substitution remains constrained by technology deployment, feedstock availability, capital requirements and the need to preserve operational compatibility.

For Italy and the wider European industrial system, the policy challenge is therefore neither indiscriminate preservation of every conventional refinery nor unrestricted rationalisation based solely on short-term market economics. It is the construction of a defensible system for deciding which production capabilities Europe must retain, which it can transform, which it can safely retire and who will finance capabilities maintained for collective security.

The distinction will determine whether October 2026 becomes the beginning of a lasting European industrial-security settlement or another episode in which strategic value is acknowledged only after productive capacity has already been lost.

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Europe’s Refining Dependency and the Return of Industrial Security

Chapter 1 — The Brussels Policy Pivot of 28 October 2026

Strategic judgment: Europe is beginning to recognise refining as an industrial capability that cannot be judged exclusively by commercial profitability or projected fossil-fuel demand

The European Commission’s decision to convene its first High-Level Dialogue with the European oil refining industry on 28 October 2026 constitutes a significant development in the relationship between European energy policy, industrial competitiveness and collective defence. Its importance derives less from the immediate discussion of fuel prices, which had already become a central concern during the Middle Eastern crisis, than from the institutional decision to bring the Commissioner responsible for Defence and Space into a policy discussion historically dominated by energy markets, environmental regulation and industrial restructuring. By jointly chairing the meeting, Dan Jørgensen and Andrius Kubilius placed refining within a broader conception of European security in which the physical availability of diesel and aviation fuel becomes relevant to industrial continuity, military mobilisation and the ability of European governments to sustain essential transport systems during geopolitical disruption. NATO’s participation reinforced the significance of this change, although participation in an EU-led dialogue must not be confused with the adoption of a NATO-wide industrial policy or a binding commitment to preserve particular European installations. The Commission described the initiative as the beginning of a broader engagement process intended to identify shared priorities and possible measures, not as the announcement of a completed legislative framework or a funded programme of refinery-capacity protection. That distinction is central to assessing the initiative’s credibility because the economic decisions governing refinery closures, major upgrades and long-term conversion projects depend on regulatory obligations, capital availability, expected product demand and future operating margins, none of which can be permanently altered by political recognition alone. Commission launches High-Level Dialogue with the European oil refining sector — European Commission — October 2026 Energy+1

The Commission’s initiative also exposes an increasingly consequential distinction between decarbonisation as a long-term economic transformation and the preservation of essential industrial capabilities during that transformation. A future reduction in European demand for conventional petroleum products does not imply that the productive assets currently supplying those products have become strategically dispensable, particularly when the transition proceeds at different speeds across passenger transport, heavy road freight, commercial aviation, industrial machinery and defence. Refining installations are capital-intensive, technically specialised and deeply integrated with transport infrastructure, petrochemical supply chains and industrial energy systems. Their closure can therefore eliminate more than nominal processing capacity: it may dismantle operational competencies, disrupt product-storage relationships, reduce the geographical diversity of supply and increase the time and cost required to restore comparable capabilities. Yet the reverse proposition also requires qualification. Not every refinery necessarily possesses the same strategic value, and maintaining inefficient or poorly located capacity can impose substantial costs without delivering a corresponding improvement in crisis resilience. The relevant policy question is consequently whether Europe can establish a transparent method for distinguishing commercially redundant capacity from production capabilities whose disappearance would create disproportionate consequences for security, industrial continuity or defence readiness. Such a method would permit decarbonisation and strategic retention to be evaluated together rather than presenting them as mutually exclusive objectives.

Institutional chronology: from oil-market surveillance to an explicit defence-industrial dialogue

The October meeting was not an isolated institutional response. It followed months of European concern over the consequences of Middle Eastern instability for international crude oil markets, refined-product availability and the functioning of strategic fuel supply chains. On 8 September 2026, the Commission reported that representatives of EU countries, industry, the International Energy Agency, the Energy Community and NATO had participated in an Oil Coordination Group meeting examining security of supply. That meeting established an important distinction between international price volatility and actual physical scarcity: European jet-fuel and diesel demand continued to be met through increased European refinery production and alternative international supply, while commercial and emergency inventories remained sufficient at the time. On 29 September, the Commission again reported stable physical availability but high prices, lower-than-usual commercial inventories in the Amsterdam–Rotterdam–Antwerp trading hub and European refineries operating close to maximum capacity. These observations created an important operational constraint for the subsequent policy dialogue because they suggested that immediate increases in European fuel output could not simply be obtained by activating large volumes of idle processing capacity. Oil Coordination Group: No immediate security of oil supply concerns in the EU — European Commission — September 2026 Oil Coordination Group: Continued concern about prices while supply remains stable — European Commission — September 2026 Energy+1

The political escalation followed on 6 October, when Commission President Ursula von der Leyen announced the intention to establish a High-Level Dialogue on European refineries. The European Council’s discussions of 15–16 October subsequently formed part of the institutional context for the Commission’s oil-market response, while the Oil Coordination Group meeting reported on 22 October confirmed that diesel and jet-fuel markets remained tight without establishing a contemporaneous physical shortage within the Union. The same communication referred to the International Energy Agency’s consideration of the remaining volumes associated with its March 2026 collective action, demonstrating that the developing response combined emergency-market coordination with an emerging interest in longer-term industrial capability. On 28 October, the Commission convened refining companies, emerging-fuel producers, engineering firms, technology suppliers, industry associations and NATO representatives for the high-level meeting. The chronology indicates an evolution from monitoring market disruption towards recognising the structural importance of domestic fuel production, but it does not establish that the Commission had already selected specific capacity-retention instruments or agreed on their financial consequences. Oil Coordination Group discusses EU fuel market developments — European Commission — October 2026 European refining — European Commission — October 2026 Energy+1

Date	Institutional development	Documented position or observation	Strategic significance
8 September 2026	Oil Coordination Group meeting involving NATO and international energy institutions	EU supply remained sufficient despite Middle Eastern instability and price volatility	Established the distinction between high prices and physical shortages
29 September 2026	Commission assessment of refined-product markets	Refineries operating near maximum capacity; diesel and jet-fuel prices elevated	Restricted the apparent scope for immediate production increases
6 October 2026	Announcement by Commission President Ursula von der Leyen	High-Level Dialogue on European refineries proposed	Elevated refining to an explicit political-industrial priority
15–16 October 2026	European Council meeting	Institutional context for continued Commission action on fuel markets	Reinforced political attention to energy security
21–22 October 2026	Oil Coordination Group meeting and subsequent publication	Supplies tight, but no physical EU shortage reported	Confirmed the difference between market stress and supply interruption
28 October 2026	First High-Level Dialogue chaired by Jørgensen and Kubilius	Industry, technology providers and NATO participated	Connected industrial capacity with defence readiness and energy security
After 28 October 2026	Intended technical engagement and transformation roadmap	Commission announced continued cooperation with the sector	Created a policy-development process, not yet a binding investment framework

The sequence reveals why the October initiative should be evaluated as a policy pivot in the Commission’s treatment of industrial capacity rather than as evidence that the European energy transition itself has been abandoned. The Commission continues to envisage a reduction in demand for conventional fossil fuels, while simultaneously recognising that the productive system supplying remaining demand must remain viable and adaptable. Its own refining-policy material acknowledges the sector’s need to manage high energy costs, international competition, shrinking conventional capacity and investment in biofuels and synthetic fuels. The potentially important change is therefore the introduction of an additional decision criterion: the availability of strategic fuels during periods in which commercial markets cannot be assumed to provide timely or geographically reliable supplies. The challenge is that refinery investment decisions normally require confidence over many years, whereas the immediate political response is driven by a market crisis whose duration remains uncertain. A policy designed only to ease current prices may leave the structural investment problem unresolved, while a policy designed exclusively around long-term security could fail if it disregards the economics of refinery operation during normal market conditions. European refining — European Commission — October 2026 European Commission

The significance of NATO participation and the limits of the institutional mandate

The presence of NATO at the dialogue introduces a materially different criterion for assessing European refining infrastructure. Military fuel availability cannot be evaluated solely through annual European balances because armed forces must obtain appropriately specified products at particular locations, often within compressed mobilisation schedules and under conditions in which ports, pipelines, storage facilities or transport corridors may be disrupted. NATO has long recognised this dependence through its petroleum infrastructure and fuel-logistics arrangements. According to its official description, the NATO Pipeline System comprises ten distinct storage and distribution systems spanning approximately 10,000 kilometres across twelve NATO countries, with an aggregate storage capacity of approximately 4.1 million cubic metres. These facilities connect refineries, entry points, depots, military installations, civilian airports and transport-loading infrastructure. The existence of such a network provides clear documentary evidence that liquid-fuel distribution is an established component of Allied military readiness, rather than an entirely new concern introduced by the October dialogue. What is new is the extent to which the Commission is explicitly incorporating the industrial sources of those fuels into a discussion of European defence and industrial policy. NATO Pipeline System — North Atlantic Treaty Organization — March 2025 NATO Topic

The institutional consequences nevertheless require careful differentiation. NATO defines military requirements and coordinates relevant collective-defence capabilities, but commercial refinery investment, national emergency stocks, industrial permitting, environmental compliance and EU competition rules operate through other authorities. European governments remain responsible for many aspects of strategic-stockholding and critical-infrastructure protection, while companies determine commercial investments within the applicable legal and market environment. The Commission can coordinate policy development, propose legislation and facilitate the integration of energy and industrial objectives, but the October meeting did not itself transfer national defence procurement authority to Brussels or create an obligation for refiners to maintain production regardless of commercial conditions. A viable security framework would have to connect those separate institutional competences through explicit requirements, contractual mechanisms, infrastructure planning and an agreed division of financial responsibility. Without that connection, the defence community can identify a need for secure fuel supplies while the refining industry continues to assess investment decisions against commercial returns that do not fully compensate the provision of standby or emergency capacity.

The political economy of a strategic asset

The central economic issue is that the social value of retaining refinery capacity during an extreme disruption may exceed the revenue that an operator can earn from that capacity during ordinary conditions. A refinery may be important to national security because of its location, specialised fuel output or ability to provide alternative supply routes, yet its commercial viability remains determined principally by product margins, feedstock costs, operating expenditure, regulatory costs and expectations of future demand. If governments consider the continued availability of a particular capability indispensable, that judgement must eventually be translated into an identifiable financial or regulatory instrument. Otherwise, the operator is being asked to preserve an option for society without necessarily receiving compensation for the capital and operating costs of preserving it. This does not imply that all refining investment requires public support, nor that every closure represents a strategic failure. It means that public authorities must determine when the private and collective value of capacity diverge, demonstrate the significance of that divergence and design proportionate measures that do not unnecessarily subsidise production that would remain commercially viable in any event.

The argument for a long investment horizon follows from that problem. Major refinery modernisation, conversion and associated infrastructure investment are economically sensitive to expected operating conditions over periods substantially longer than a single political mandate or commodity-price cycle. Industry requests for 15–20-year visibility should therefore be understood as demands for predictable rules and investable market conditions rather than as evidence that governments must guarantee a fixed demand for fossil products over the same period. A credible settlement would preserve the direction of environmental policy while clarifying how critical fuel capabilities, renewable-fuel investments and national-security requirements are expected to coexist. The relevant policy commitments could include transparent strategic-capacity criteria, predictable treatment of conversion investments, long-term procurement arrangements for specified fuels, emergency logistics agreements and financing for infrastructure that delivers identifiable collective benefits. Each instrument would require its own legal and fiscal assessment, and none should be presented as having been adopted through the October dialogue.

Chapter 1 — Key judgments

The first High-Level Dialogue should be considered an institutional recognition of an industrial-security problem whose underlying causes extend well beyond the immediate Middle Eastern crisis. The most significant development is the integration of defence requirements into the Commission’s discussion of European refinery viability. Its effect on industrial investment remains conditional upon the creation of specific rules, financial incentives and operational requirements. The policy shift would be confirmed by published capacity-security criteria, implementation measures and investment decisions that can be linked to the new framework; it would be weakened if the dialogue remained focused on short-term prices without resolving the economics of long-lived production assets.

Chapter 2 — European Refining Capacity, Product Balances and External Dependence

Strategic judgment: Europe’s refining vulnerability is not explained by inadequate aggregate production alone, but by the mismatch between crude dependence, refinery product yields, national consumption and geographically accessible supply

The European refining system must be evaluated as a geographically distributed industrial network that transforms overwhelmingly imported crude oil into different combinations of transport fuels, petrochemical feedstocks and other petroleum products. Its strategic relevance is determined not simply by how much crude processing capacity exists within the Union, but by whether that capacity can produce the specific products required by European consumers and defence forces, obtain suitable feedstocks during external disruption and distribute finished fuels across national borders. The distinction is particularly important because Europe’s historical industrial geography and refinery configurations have not been designed exclusively around contemporary defence requirements or the emerging composition of future fuel demand. Some installations are integrated with major ports and international crude markets, others depend on pipeline or inland transport systems, and their relative economic competitiveness varies according to refinery complexity, product yields, energy costs and access to markets. Consequently, two refineries with similar nominal crude-processing capacities may deliver very different strategic benefits, while the closure of a smaller but geographically important facility could create a local vulnerability disproportionate to its contribution to total EU output.

Eurostat’s statistical record provides an indispensable baseline for this analysis. In 2024, indigenous EU crude oil production amounted to 15.5 million physical tonnes, while crude oil imports reached 471.3 million tonnes. Italy was the largest indigenous crude producer within the Union at 4.2 million tonnes, followed by Denmark and Romania at 2.9 million tonnes each. The principal external crude suppliers included the United States at 70.0 million tonnes, Norway at 65.9 million tonnes, Kazakhstan at 52.4 million tonnes and Iraq at 28.5 million tonnes. These quantities show that the EU’s refining industry depends on extensive international supply relationships, even where finished fuels are manufactured domestically. At the same time, the figures do not imply that all imported crude is equally vulnerable: supplier geography, maritime route, pipeline access, commercial contract structure and the availability of alternative compatible crude grades all affect the consequences of a particular disruption. The comparison also requires a strict statistical distinction between crude measured in physical tonnes and petroleum-product output measured in tonnes of oil equivalent. Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 1–3 European Commission

The geographical structure of Europe’s crude dependence

Indicator	2024 value	Unit	Strategic interpretation
EU indigenous crude production	15.5	Million physical tonnes	Limited domestic upstream production
EU crude imports	471.3	Million physical tonnes	Principal source of refinery feedstock
United States crude supplied to EU	70.0	Million physical tonnes	Largest listed origin
Norway crude supplied to EU	65.9	Million physical tonnes	Major non-EU European source
Kazakhstan crude supplied to EU	52.4	Million physical tonnes	Important external supply relationship
Iraq crude supplied to EU	28.5	Million physical tonnes	Material exposure to Middle Eastern production and transport
Italy indigenous crude production	4.2	Million physical tonnes	Largest EU national producer in the cited series
Denmark indigenous crude production	2.9	Million physical tonnes	Smaller domestic upstream contribution
Romania indigenous crude production	2.9	Million physical tonnes	Smaller domestic upstream contribution

Source: Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 1–2.

These figures should not be interpreted as a complete crude-oil availability balance because refinery throughput, stocks, imports, exports and timing adjustments are separate variables. Nor is it appropriate to calculate European self-sufficiency by simply dividing indigenous crude production by total refinery output, since the corresponding quantities are expressed in different measurement systems and may reflect different processing and energy-balance conventions. What the data establish conclusively is the structural dependence of European refineries on external feedstocks and the importance of international transport continuity. Even a well-maintained refinery with substantial nominal capacity cannot contribute to supply security if it cannot obtain compatible crude, maintain its hydrogen and electricity requirements or access functioning product distribution systems. This is particularly relevant to the assessment of European strategic autonomy because retaining refining capacity changes the form of external dependence rather than eliminating it. Dependence on foreign finished products may be reduced, while dependence on international crude supply persists.

The redistribution of European crude sourcing after Russia’s invasion of Ukraine demonstrates both the adaptability and the limits of this system. Eurostat documents a major reduction in Russian oil imports and increased sourcing from other international suppliers. This diversification reduced a particular geopolitical exposure, but it also required refiners, traders and infrastructure operators to accommodate different transport routes and commercial relationships. The capacity to change suppliers is therefore valuable, although substitution cannot always be assumed to be instantaneous or costless. Refinery equipment is designed to process crude with specific characteristics, while changes in sulphur content, density and product yields can affect hydrogen consumption, unit loading, operating margins and the volume of middle distillates produced. A robust assessment must consequently consider the compatibility of alternative crude grades and the capacity of individual plants to sustain fuel quality while processing them, rather than treating every imported barrel as operationally interchangeable.

Refinery output and the structural concentration of European production

In 2024, the European Union produced 543.7 million tonnes of oil equivalent of petroleum products, an increase of 1.2% from the previous year. The historical series reveals a substantial longer-term contraction from 645.39 Mtoe in 1998 and 642.2 Mtoe in 2006, with the exceptional pandemic-related low of 504.5 Mtoe recorded in 2020. Germany remained the largest producer in 2024, with 99.0 Mtoe, followed by Italy at 68.8 Mtoe, Spain at 64.3 Mtoe and the Netherlands at 57.1 Mtoe. These four countries accounted for approximately 289.2 Mtoe, or 53.2% of the EU’s reported petroleum-product production in that year. This derived share, calculated from Eurostat’s figures, identifies a substantial geographical concentration in major producing economies, although the geographic distribution of production must not be equated with guaranteed availability in neighbouring markets. Cross-border transport, inventories, refinery configuration and domestic consumption all affect the extent to which one country’s output can compensate for disruption elsewhere. Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 4–5 European Commission

EU petroleum-product production	2024 output, Mtoe	Share of EU total, calculated	Strategic relevance
Germany	99.0	18.2%	Largest national production base
Italy	68.8	12.7%	Major Mediterranean refining concentration
Spain	64.3	11.8%	Important Iberian and maritime production base
Netherlands	57.1	10.5%	Major Northwest European refining and trading infrastructure
Other EU member states combined	254.5	46.8%	Geographically dispersed remaining capacity
EU-27 total	543.7	100.0%	Aggregate petroleum-product output

Calculated shares use 543.7 Mtoe as the denominator and are rounded to one decimal place. Source: Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 4–5.

The product composition of European refining is even more important than the aggregate total. Eurostat records 215.7 Mtoe of gas/diesel oil production in 2024, compared with 104.3 Mtoe of motor gasoline, 53.1 Mtoe of fuel oil and 41.6 Mtoe of naphtha. Gas/diesel oil consequently represented approximately 39.7% of aggregate EU petroleum-product output, while gasoline represented around 19.2%, fuel oil 9.8% and naphtha 7.7%. These are shares of the entire production total, not refinery yield percentages for a representative individual plant. The figures demonstrate the industrial scale of the European middle-distillate system, but they also establish that total production and the availability of a particular required fuel are different questions. Gas/diesel oil in the Eurostat classification covers a broader petroleum-product category than automotive diesel alone, while military diesel requirements may be subject to operational, technical and logistics constraints not visible in the aggregate statistical series. The same caution applies to aviation fuels, which must satisfy specific technical and quality requirements and cannot be replaced automatically by other distillate streams.

Petroleum-product category	EU output, 2024	Calculated share of all products	Principal analytical significance
Gas/diesel oil	215.7 Mtoe	39.7%	Major middle-distillate production category
Motor gasoline	104.3 Mtoe	19.2%	Important road-transport product
Fuel oil	53.1 Mtoe	9.8%	Industrial and maritime-related product category
Naphtha	41.6 Mtoe	7.7%	Petrochemical and refinery-related industrial input
Other petroleum products combined	129.0 Mtoe	23.7%	Remaining products, including further fuel categories
Total	543.7 Mtoe	100%	EU aggregate production

Shares are rounded independently. Source: Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 4–5.

The persistence of product-specific import dependence

The relationship between refinery production and external dependence becomes clearer when product-level trade balances are considered. In 2024, the EU recorded net extra-EU imports of 15.7 Mtoe of gas/diesel oil, 14.2 Mtoe of liquefied petroleum gases and 11.0 Mtoe of kerosene-type jet fuel. Conversely, the Union recorded net exports of 43.3 Mtoe of motor gasoline and 6.1 Mtoe of fuel oil. This structure demonstrates that the EU refining industry is not simply too small in relation to all petroleum-product demand; it produces different products in quantities that do not perfectly match European consumption. A surplus in one category cannot necessarily compensate for a shortage in another because refinery conversion processes, fuel quality, end-use equipment and logistics constraints limit substitution. The coexistence of substantial gasoline exports and middle-distillate imports also illustrates why policies aimed at preserving or increasing aggregate refinery throughput may be insufficient if they do not address product-specific yields and market requirements. Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 5–7 European Commission

Product	EU net trade, 2024	Trade position	Implication
Gas/diesel oil	+15.7 Mtoe	Net importer	Residual dependence on imported middle distillates
Kerosene-type jet fuel	+11.0 Mtoe	Net importer	External supply contributes materially to aviation-fuel availability
Liquefied petroleum gases	+14.2 Mtoe	Net importer	Additional petroleum-product import dependence
Motor gasoline	−43.3 Mtoe	Net exporter	Production exceeds the net domestic absorption reflected in trade
Fuel oil	−6.1 Mtoe	Net exporter	Different balance from diesel and aviation fuels

A positive figure denotes net imports; a negative figure denotes net exports. Source: Oil and petroleum products — a statistical overview — Eurostat — August 2026, Table 1.

The distinction between net and gross trade is indispensable when considering a supply disruption. A net-import figure subtracts exports from imports and therefore describes the balance of external trade, not the total quantity of imported fuel entering the Union. Even a country or region with a relatively small net-import position may possess substantial gross import flows and simultaneous exports to different destinations, while local disruptions may occur despite a balanced aggregate market. The 2024 net-import values therefore cannot independently establish the quantity of jet fuel or diesel that Europe would lose under an interruption of imports from a particular geographical region. Such a calculation requires imports by origin, product, arrival point and transport route, together with evidence on inventories and alternative supply capabilities. It would also require understanding which national markets are physically connected and whether their distribution systems can accommodate increased cross-border flows.

European demand: the structural significance of diesel, aviation and industrial transport

Eurostat’s consumption figures reinforce the continued importance of liquid fuels across the European economy. Total final consumption of oil and petroleum products for energy and non-energy purposes amounted to 379.5 Mtoe in 2024, with Germany accounting for 76.37 Mtoe, France 58.36 Mtoe, Italy 42.04 Mtoe and Spain also 42.04 Mtoe. Germany’s share was approximately 20.1%, France’s 15.4%, and Italy and Spain each approximately 11.1%. These figures identify major national demand centres but do not, by themselves, establish the division between civilian and military consumption, nor do they show which quantities were supplied by domestic refineries or imported finished products. They are nevertheless important for evaluating whether refining and storage infrastructure remains located close to major consumption regions, particularly where industrial freight corridors, airports and national transport networks create persistent demand for middle distillates. Oil and petroleum products — a statistical overview — Eurostat — August 2026, Table 2 European Commission

National market	2024 consumption	Share of EU total	Comparison
Germany	76.37 Mtoe	20.12%	Largest national demand centre
France	58.36 Mtoe	15.38%	Second-largest among the listed markets
Italy	42.04 Mtoe	11.08%	Major Mediterranean consumption centre
Spain	42.04 Mtoe	11.08%	Equivalent reported consumption to Italy
Poland	30.53 Mtoe	8.04%	Important Central European market
Netherlands	20.70 Mtoe	5.45%	Significant refining and trading hub
Belgium	18.16 Mtoe	4.78%	Important interconnected Northwest European market
EU-27 total	379.5 Mtoe	100%	Final energy and non-energy petroleum-product consumption

Source: Oil and petroleum products — a statistical overview — Eurostat — August 2026, Table 2.

The longer-term demand trajectory demonstrates why refinery investment is unusually difficult. European consumption of oil and petroleum products has declined substantially from earlier historical peaks, but that decline has not occurred uniformly across products or uses. Gas/diesel oil final energy consumption reached 214.7 Mtoe in 2024, compared with 249.4 Mtoe at its 2006 peak, while gasoline consumption stood at 71.7 Mtoe. Aviation fuel followed a different pattern, recovering to approximately 45.0 Mtoe in 2024 after the severe pandemic-related contraction, although still below its 2019 peak of 46.6 Mtoe. The figures show that conventional transport-fuel demand remains significant even as the overall energy system changes. They do not establish that current production should be maintained indefinitely, but they do imply that investment decisions must be assessed against product-specific demand projections rather than a single aggregate assumption of declining oil consumption. A refinery built or modernised to supply diesel and jet fuel cannot be evaluated adequately from the expected trajectory of passenger-car gasoline demand alone, just as future aviation-fuel requirements cannot be inferred directly from the rate of electric-vehicle adoption.

The limits of nominal capacity as an indicator of strategic security

A further methodological problem concerns the meaning of refinery capacity itself. Nameplate crude-processing capacity normally refers to the amount of crude that a facility is designed to process over a stated period under specified conditions. It does not establish continuous operational availability, the percentage of throughput converted into diesel or jet fuel, the amount of spare capacity available during a crisis or the speed at which the plant can increase production of a particular product. Realised output depends on maintenance, operating conditions, feedstock properties, the availability of hydrogen and utilities, conversion-unit constraints and compliance with finished-fuel specifications. A complex refinery may process heavier or more sulphurous crude and convert a larger fraction of its output into marketable transport fuels, while a simpler facility may have different yield limitations. Consequently, the preservation of one million tonnes of annual crude-processing capacity does not necessarily provide the same security benefit across all installations.

The Commission’s September observation that European refineries were operating near maximum capacity is especially important because it challenges any assumption that short-term increases in diesel and jet-fuel production can be achieved merely through administrative encouragement. Additional output might be obtained through marginal operational optimisation, changes in crude slate, adjustments to processing schedules or improvements in product blending and logistics, but the magnitude of such gains cannot be established without refinery-level technical data. Moreover, increasing one product yield may reduce another, impose additional energy and hydrogen requirements, increase operating costs or require changes in downstream processing. A strategy aimed at increasing middle-distillate production should therefore specify target products, feasible operational changes, expected incremental quantities and the conditions under which those quantities can be sustained. Simply maximising total throughput may be less effective than improving particular product yields or removing bottlenecks in transport and distribution.

Chapter 2 — Key judgments

The European Union possesses a substantial refining industry, but its strategic resilience is constrained by overwhelming crude-import dependence, product-specific net imports and the geographical distribution of processing and distribution capabilities. Germany, Italy, Spain and the Netherlands account for slightly more than half of the 2024 European petroleum-product production total, while diesel and jet fuel remain important areas of external product dependence. The relevant industrial-security objective is not the preservation of aggregate capacity regardless of configuration, but the maintenance of sufficient, adaptable and geographically usable production of strategically necessary fuels. A material change in this assessment would require evidence that alternative feedstocks, new fuel technologies, product imports or infrastructure investments can provide equivalent security under realistic disruption conditions.

Chapter 3 — Civilian and Military Fuel Security Under Stress

Strategic judgment: Europe’s greatest fuel-security vulnerability lies in the simultaneous disruption of supply, processing and distribution, particularly when military demand increases faster than civilian consumption can be reduced

The strategic significance of European refining becomes clearest when the analytical perspective shifts from annual energy balances to the ability of civilian and military institutions to obtain specific fuels during a sustained crisis. Under ordinary market conditions, diesel and aviation fuel move through an international system of refineries, trading companies, maritime transport operators, storage terminals, pipelines and inland distribution networks. Commercial arbitrage permits differences between regional production and demand to be resolved through imports, exports, changes in inventories and adjustments in refinery operating conditions. During a major geopolitical disruption, however, those mechanisms may become simultaneously more expensive, less reliable and more difficult to coordinate. A refinery capable of producing sufficient diesel under normal circumstances may experience feedstock constraints, while another facility with available product inventories may be unable to supply a distant military installation because of inadequate transport capacity or competing civilian demand. European fuel security therefore depends on the integrity of the entire supply chain rather than on aggregate product availability alone. This distinction is particularly important for military operations, where a fuel shortage at the wrong location or at the wrong moment can interrupt air operations, restrict ground-force mobility or reduce the ability to sustain deployed formations even when sufficient petroleum products remain available elsewhere in the European economy.

The European Commission’s own crisis-monitoring record demonstrates the importance of distinguishing market tightness from physical interruption. On 22 October 2026, the Oil Coordination Group reported continued pressure on diesel and jet-fuel markets but confirmed that no physical shortage of those products existed within Europe at that time. This observation establishes the immediate condition preceding the High-Level Dialogue but does not provide evidence that European infrastructure could necessarily withstand a more severe or prolonged disturbance. The capacity to meet demand in a functioning commercial market, supported by imports and inventory adjustments, is not equivalent to guaranteed availability after a reduction in maritime deliveries, simultaneous refinery outages or rapid military mobilisation. The distinction also applies to price formation. A region can experience sharply higher fuel prices without exhausting physical supplies, while an individual airport, military depot or inland distribution centre can encounter operationally significant shortages even when aggregate European inventories appear adequate. In either case, annual supply statistics provide an incomplete picture of the mechanisms through which disruption is transmitted to final users. Oil Coordination Group discusses EU fuel market developments — European Commission — October 2026 Energy

Commercial aviation: a concentrated dependence on technically specialised fuel

Commercial aviation is one of the clearest examples of a sector in which liquid-fuel dependence remains structurally important despite the broader transition towards alternative energy systems. Eurostat records approximately 45.0 million tonnes of oil equivalent of kerosene-type jet-fuel consumption in 2024, compared with 46.6 Mtoe in 2019. This recovery demonstrates that European aviation continues to require substantial quantities of specialised liquid fuel, while the Commission’s estimate that domestic refineries supply approximately 70% of European jet-fuel consumption indicates the continuing importance of the domestic industrial base. The remaining supply contribution cannot be interpreted mechanically as a fixed level of import vulnerability because trading patterns, changes in stocks and the relationship between aviation consumption and refinery production require a more detailed reconciliation. Nevertheless, the existence of a material imported component creates exposure to disruptions affecting international refining centres, maritime transport and the commercial availability of suitable aviation fuel. The most consequential vulnerabilities may arise not from the permanent loss of a particular supplier, but from the speed at which alternative supply can be contracted, transported, quality-controlled and delivered to airports whose normal operations depend on predictable replenishment schedules. Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 9–11 European refining — European Commission — October 2026 European Commission+1

The aviation problem is further complicated by the overlap between civilian airport infrastructure and military air operations. Major airports depend on storage installations, hydrant systems, fuel-quality controls, tanker deliveries and, where available, pipeline connections. Military aircraft impose additional requirements relating to fuel specifications, operating locations, deployment intensity and the availability of supporting logistics. Fuel produced within the European Union therefore contributes to readiness only if it can be delivered through functioning infrastructure and accepted for the intended aircraft or other military platform. The importance of those constraints becomes greater during a simultaneous increase in military air activity and civilian demand, particularly when governments must determine how limited distribution capacity should be allocated. NATO’s established fuel infrastructure provides an institutional basis for coordinating such requirements, but it does not eliminate differences in national infrastructure coverage or guarantee that every forward operating location possesses equivalent access to bulk fuel distribution. For European policymakers, the relevant planning requirement is therefore not simply the quantity of aviation fuel available at refineries, but the quantity that can be delivered to specific operational locations at the required rate and maintained over the expected duration of a crisis.

Road freight and industrial logistics: the consequences of diesel scarcity extend beyond transport companies

Diesel presents a different but equally important strategic problem because its economic significance extends across commercial freight, industrial distribution, agricultural operations, construction equipment and numerous forms of public and private transport. Eurostat reports that gas/diesel oil final energy consumption reached 214.7 Mtoe in 2024, demonstrating the continued importance of this product category within the European energy system. Although this aggregate category cannot be treated as a direct measure of road-freight diesel consumption, the scale of the figure demonstrates why disruption of middle-distillate supply could have broad consequences for economic activity. Road transport accounted for approximately 47.6% of petroleum-product consumption in the sectoral presentation reported by Eurostat, further underlining the importance of transport fuels within the wider petroleum balance. The effect of diesel scarcity would consequently propagate through supply chains rather than remaining confined to fuel retailers or transport operators, with potential consequences for food distribution, industrial deliveries, infrastructure maintenance and the continuity of services that depend on road-based logistics. Oil and petroleum products — a statistical overview — Eurostat — August 2026, pp. 9–11 European Commission

The principal mechanism of economic transmission would depend on the form and duration of the disruption. A short-lived price increase would primarily affect operating costs, cash flow and freight pricing, with different degrees of transmission to final consumers depending on contractual arrangements and market competition. A sustained interruption of physical supplies would create a different problem, potentially requiring prioritisation of essential distribution, adjustments in industrial production schedules and the reallocation of available inventories. International product imports could alleviate such conditions where external markets remain accessible, but they would be less effective during a broader shortage affecting several major consuming regions simultaneously. Equally, domestic refinery capacity would provide limited protection if the disruption originated in crude supply or if inland logistics networks could not deliver finished products. These mechanisms show why a comprehensive fuel-security framework should distinguish price mitigation, physical supply management and the protection of essential services rather than assuming that one instrument can address all three.

NATO fuel logistics: the operational importance of distribution infrastructure

NATO’s published petroleum infrastructure provides the strongest available official evidence of the relationship between fuel distribution and military readiness. The Alliance reports a pipeline system extending approximately 10,000 kilometres through twelve member countries, incorporating storage and distribution infrastructure with an aggregate capacity of 4.1 million cubic metres. The Central Europe Pipeline System constitutes the largest component of this network, crossing Belgium, France, Germany, Luxembourg and the Netherlands. NATO identifies approximately 5,300 kilometres of pipeline within the CEPS network, linking military and civilian installations, refineries, depots, ports and airports. The system includes connections to 29 NATO depots and six non-military depots, with an associated storage capacity of approximately 1.2 million cubic metres. These figures demonstrate the scale of dedicated petroleum infrastructure already available within parts of Europe, but they do not establish that the network has unlimited capacity to meet a major increase in military demand or that its geographical distribution corresponds fully to contemporary operational priorities. NATO Pipeline System — North Atlantic Treaty Organization — March 2025 Central Europe Pipeline System — North Atlantic Treaty Organization — August 2021 NATO Topic+1

NATO petroleum infrastructure	Officially documented characteristic	Operational significance
NATO Pipeline System	Approximately 10,000 km	Extensive multinational petroleum-distribution infrastructure
Geographic coverage	Twelve NATO countries	Important but geographically incomplete Alliance-wide coverage
Number of storage and distribution systems	Ten	Multiple national and multinational infrastructure arrangements
Aggregate NATO Pipeline System storage	Approximately 4.1 million m³	Bulk petroleum-storage capability
Central Europe Pipeline System	Approximately 5,300 km	Principal multinational distribution network in Central Europe
CEPS participating host countries	Belgium, France, Germany, Luxembourg, Netherlands	Concentration in Northwest and Central Europe
CEPS NATO depots	29	Military-linked storage and distribution nodes
CEPS non-military depots	Six	Civilian connections within the network
CEPS associated storage	Approximately 1.2 million m³	Bulk storage supporting distribution
CEPS documented products	Jet fuel, gasoline, diesel and naphtha	Multi-product transport capability

Sources: NATO Pipeline System — NATO — March 2025 and Central Europe Pipeline System — NATO — August 2021.

The geographical concentration of this infrastructure has important implications for contemporary European defence planning. NATO’s official description of the Central Europe Pipeline System identifies an established network linking significant parts of Western and Central Europe, including major civilian airports and military facilities. However, the existence of a well-developed pipeline system in these countries does not automatically establish equivalent bulk-fuel distribution capacity farther east, where military reinforcement could increase demand for road and rail transport as well as operational fuel deliveries. NATO’s own documentation acknowledges the continuing importance of mobile and deployable fuel systems alongside fixed infrastructure, while its energy-security material confirms that Allied forces depend significantly on civilian energy networks. The operational requirement is therefore to assess how fixed pipelines, road and rail distribution, maritime reception facilities and deployable storage systems can function together, especially when the location of fuel demand changes rapidly. A European refining strategy that preserves substantial production in one region without examining how that fuel can reach military consumers elsewhere would address only part of the security problem. Energy security — North Atlantic Treaty Organization — official assessment NATO Topic

An additional institutional distinction concerns the relationship between commercial and military use of petroleum infrastructure. NATO explains that the Central Europe Pipeline System also transports products for civilian customers and that its commercial arrangements contain provisions protecting military priority. Such arrangements demonstrate that infrastructure can serve ordinary markets while retaining a defence function, potentially improving economic utilisation during peacetime. They do not, however, establish that military priority can resolve a system-wide shortage of fuel or compensate for the loss of upstream production. Priority access to a pipeline or storage terminal is meaningful only where fuel is available to enter the system, where the transport equipment remains operational and where downstream facilities can receive the necessary quantities. The economic significance is that dual-use infrastructure can reduce the cost of maintaining strategic capability, but its security value remains dependent on the reliability of the wider supply network. This principle is directly relevant to the Commission’s refining initiative because it suggests that future investments should be assessed according to both commercial utilisation and demonstrable military-logistics value.

Strategic stocks: legal obligations and their limitations

European emergency-stock legislation establishes an important baseline for managing oil-supply disruptions. Under Directive 2009/119/EC, EU member states must maintain emergency stocks of crude oil or petroleum products equivalent to at least 90 days of net imports or 61 days of consumption, whichever is higher. Member states must report their stock positions and maintain procedures for responding to disruption, while the Commission facilitates coordination through the Oil Coordination Group and established arrangements with the International Energy Agency. These provisions demonstrate that European oil security already possesses a legal and institutional framework, although the Commission began a process in 2026 to reconsider aspects of that framework in light of the evolving geopolitical and energy-security environment. Security of oil supply — European Commission — official policy framework Workshops on the revision of the EU Oil Stocks Directive — European Commission — July 2026 Energy+1

The existence of statutory emergency stocks should not be interpreted as evidence that European military operations can be sustained for 90 days, or that civilian consumers would necessarily receive uninterrupted supplies throughout a crisis of equivalent duration. The legal formula concerns national obligations calculated from historical import or consumption measures; it does not automatically describe the stock of each specific fuel, its location, its suitability for military use or the rate at which it can be transported to priority consumers. Some inventories may be held as crude oil rather than finished products, which means their practical contribution to diesel or aviation-fuel availability depends on operating refinery capacity. Other inventories may be held in locations where distribution constraints limit their immediate usefulness. Emergency stocks can also serve multiple civilian requirements, creating competition between essential services and military demand. Assessing actual resilience therefore requires reconciling product-level inventories with refinery operating conditions, transport infrastructure, legal release procedures and geographical consumption requirements.

The distinction becomes especially important when evaluating a disruption affecting crude supply and refining operations simultaneously. Crude inventories may protect refinery throughput only where suitable installations remain operational and where the stored crude can be processed economically and technically. Finished-product stocks may provide more immediate supply for a specified end use, but they also require appropriate storage arrangements, quality assurance and functioning distribution channels. A resilience assessment based exclusively on total stocks measured in days may therefore overstate operational security unless these constraints are examined. Conversely, a diversified network of accessible inventories supported by redundant transport connections could deliver greater resilience than a superficially larger stockholding concentrated in locations that are difficult to access during a crisis.

Stress scenarios: from commercial disruption to simultaneous civilian and military demand

Three broad stress conditions provide a defensible framework for assessing the European fuel system without attributing unsupported probabilities to future geopolitical events. The first involves a disruption primarily affecting international market prices, while physical deliveries continue through established or alternative routes. Under such conditions, European refiners and fuel importers may maintain supply while passing through higher costs, with the principal policy concern centred on inflation, commercial competitiveness and the burden imposed on vulnerable consumers. The second involves a more serious interruption of imported crude or finished products, in which refineries must adjust feedstocks and operating conditions while governments and commercial operators draw upon inventories and alternative supply arrangements. The third combines external supply disruption with a significant increase in military requirements or damage to distribution infrastructure, producing simultaneous pressure on production, stocks and delivery systems. These are analytical scenarios rather than claims that such events are occurring, and the relative severity of each would depend on its duration, geographical distribution and the availability of alternative supply channels.

Scenario	Principal disruption	Civilian consequences	Defence consequences	Critical evidence required
Market-price shock	Higher crude and product prices; trade flows broadly maintained	Increased transport and industrial costs	Higher operating and procurement expenditure	Product prices, inventories, refinery utilisation, trade flows
External supply interruption	Reduced crude or finished-product deliveries	Greater dependence on stocks, imports from alternative origins and refinery adjustments	Tighter availability of specified fuels and possible logistics rescheduling	Supplier-level imports, compatible crude availability, stocks and production capability
Simultaneous supply and distribution crisis	External disruption combined with transport constraints or infrastructure outages	Potential interruptions to essential logistics and aviation	Reduced ability to sustain geographically concentrated operations	Facility availability, route redundancy, operational stocks and delivery capacity
Military demand surge	Rapid increase in demand at specified operational locations	Potential competition for logistics and product allocations	Higher requirement for bulk distribution, storage and replenishment	Military requirements, distribution capacity, fuel specifications and priority arrangements

The analytical implication is that a European fuel-security strategy should not be designed around a single maximum-disruption scenario or assume that every supply disturbance requires the same response. The most appropriate policy instruments depend on the mechanism of disruption. Price shocks may require targeted measures that address affordability without undermining market supply incentives. Physical shortages may require coordinated stock releases, product substitution where technically permissible and increased access to alternative sources. Infrastructure interruptions may require route redundancy, emergency transport arrangements and rapid restoration of damaged systems. Military surges require planning for priority supply, specialised fuel requirements and distribution rates that may exceed normal commercial patterns. These distinctions are necessary because a refinery-capacity policy cannot replace emergency logistics arrangements, just as strategic stocks cannot independently secure the long-term industrial capability needed to replenish them.

The implications for Italy, France, Germany and the United Kingdom

Italy’s position is strategically significant because its refining system is embedded in Mediterranean maritime supply routes and is connected to a national economy with substantial transport, industrial and aviation requirements. Its principal vulnerability is not reducible to a single measure of domestic refining capacity, since the security value of individual installations depends on feedstock access, product output, storage infrastructure and the ability to distribute fuels across the peninsula and to wider European markets. In a disruption affecting international maritime trade, Italian refineries could face higher crude acquisition and transport costs while retaining important domestic processing capabilities. In a crisis affecting Central or Eastern European defence requirements, the relevance of Italian production would depend on the extent to which products could be transferred through commercially and operationally available transport networks. Consequently, the strategic assessment of the Italian refining system must consider national supply resilience and the potential contribution to Allied logistics as related but separate functions.

France’s position is influenced by its substantial domestic petroleum consumption and its integration into the Central Europe Pipeline System. The latter provides an important connection between French territory and multinational fuel-distribution infrastructure, including military and civilian users. This integration offers opportunities for coordinated logistics planning, but it also creates dependencies involving shared facilities, commercial traffic and multinational operational arrangements. France’s refining policy must therefore balance the economics of domestic production with the availability of cross-border infrastructure and the requirements associated with military mobility. Its participation in established Allied fuel networks gives infrastructure governance particular importance alongside refinery capacity.

Germany combines the largest reported EU petroleum-product production volume with the largest national petroleum-consumption total in the cited Eurostat series. It also occupies a central position within continental transport and logistics networks, making the reliability of fuel distribution significant to both civilian industrial activity and military reinforcement. The country’s strategic challenge is therefore partly one of scale and partly one of geography: maintaining production capacity does not eliminate exposure to imported crude, while central European infrastructure must be capable of supporting demand arising from normal economic activity and potential Allied operations. Germany’s position illustrates why refinery competitiveness, product balances and military mobility cannot be assessed as separate policy domains when planning for a prolonged European security crisis.

The United Kingdom requires a distinct analytical treatment because it is outside the EU regulatory and emergency-stock coordination framework but remains a major NATO member with its own national petroleum infrastructure, energy-security responsibilities and defence commitments. British refining policy and EU refining policy may therefore face similar commercial and technological pressures without operating under identical legal or fiscal instruments. Cooperation on military fuel availability and logistics can occur through NATO and other relevant arrangements, but an EU-led industrial-policy framework would not automatically apply to British refinery investments. The comparative significance of the United Kingdom lies in this separation between industrial regulation and collective-defence requirements, which demonstrates that European fuel security extends beyond EU institutional boundaries and requires coordination with countries that participate in common defence structures while retaining separate domestic energy policies. The present evidence does not support assigning a quantified British supply deficit or military fuel requirement to this comparison, and those figures should not be inferred from EU-27 statistics.

The operational importance of resilience indicators

The evaluation of European fuel security should ultimately be based on a collection of indicators capable of distinguishing nominal industrial capability from operational availability. Annual refinery output and national demand establish the economic scale of the system, but they do not reveal how quickly production can be increased or redirected during a crisis. Product-level stockholding provides evidence of available inventories but does not necessarily establish whether those products can be delivered to military consumers. Pipeline length and storage capacity identify important infrastructure, but not its actual throughput under damaged, congested or otherwise constrained conditions. A reliable security assessment must therefore integrate refinery operating data, inventories by product and location, transport-system availability, consumption requirements and the performance of emergency coordination arrangements.

Analytical dimension	Required indicator	Why it matters
Refinery availability	Operational throughput and spare capacity by product	Determines realistic additional fuel output
Feedstock resilience	Alternative crude compatibility and accessible supplies	Measures ability to operate during import disruption
Product availability	Inventories by fuel type, specification and location	Distinguishes aggregate stocks from usable supply
Military logistics	Required delivery volumes and rates at operational locations	Connects fuel supply to readiness
Distribution resilience	Available pipelines, terminals, rail and road capacity	Identifies bottlenecks between producers and consumers
Import diversification	Gross imports by origin, product and transport route	Measures exposure to geographically concentrated disruptions
Emergency coordination	Stock-release procedures and cross-border agreements	Determines institutional ability to respond
Infrastructure recovery	Restoration arrangements and alternative routing capacity	Assesses duration of operational consequences
Industrial continuity	Maintenance capability, skilled personnel and input availability	Measures ability to sustain production during prolonged stress

A central limitation of the public record is the absence of a sufficiently detailed, comparable EU-wide dataset connecting military fuel requirements, operationally available refinery output and geographically accessible stocks under specified crisis conditions. NATO publishes important information about its petroleum infrastructure and recognises the dependence of military operations on civilian supply systems, while the Commission and Eurostat provide information on energy balances, petroleum-product trade and national emergency-stock obligations. These sources establish the architecture of dependence, but they do not collectively permit a reliable calculation of the number of days for which European forces could sustain a particular level of military activity under a simultaneous external supply disruption. Producing such a figure without verified operational requirements and distribution assumptions would create false precision. The appropriate conclusion is that the strategic vulnerability is demonstrable, while its exact operational magnitude remains dependent on information that is not established by the public sources examined here.

Chapter 3 — Key judgments

The European Union’s existing refinery capacity, emergency oil stocks and NATO-linked petroleum infrastructure provide significant elements of fuel-supply resilience, but none independently guarantees that strategically required diesel and aviation fuel will be available at the appropriate locations during a major crisis. The principal risk arises when several constraints coincide: imported feedstocks become less accessible, finished-product imports are disrupted, refinery operating flexibility is limited, military demand increases and distribution networks cannot transfer available fuel at the required rate. NATO’s established pipeline infrastructure demonstrates the operational importance of bulk distribution, while the Commission’s oil-security framework provides a foundation for emergency coordination. Nevertheless, the current public record does not establish a complete and quantitatively validated relationship between European civilian demand, wartime fuel requirements, usable inventories and transport capacity. The decisive policy requirement is to connect industrial production, emergency stockholding and military logistics through an assessment of actual deliverable capability rather than treating them as separate and sufficient measures of security.

Pillar I — Consolidated strategic assessment

The combined evidence from the European Commission, Eurostat and NATO establishes that the October 2026 policy initiative responds to a genuine structural issue, although the immediate crisis should not be mistaken for proof of an already existing physical shortage across Europe. Refining remains an important industrial capability because diesel and aviation fuel continue to support major civilian economic functions and military operations, while the European Union depends extensively on imported crude and retains material net imports of particular refined products. The historical contraction of production and the distribution of remaining assets make industrial geography increasingly relevant to security planning, especially where the loss of refining capacity could be accompanied by reduced logistics flexibility or diminished access to specialised fuels. NATO’s petroleum infrastructure provides an important operational dimension to this assessment, demonstrating that fuel production and delivery are connected capabilities whose availability must be evaluated together.

The highest-priority institutional task following the Brussels dialogue is therefore to establish a common evidentiary basis for identifying strategically necessary fuel production, storage and distribution capabilities. The political recognition of refining’s value will acquire practical significance only when translated into measurable requirements and credible investment conditions, while retaining the distinction between commercially viable refining, capabilities that may require specific security-related support and installations whose continued operation does not deliver a demonstrable collective benefit. This approach would permit the Union to pursue industrial transformation without assuming that future decarbonisation automatically removes present security obligations, or that preserving conventional capacity indefinitely is the only way to fulfil them.

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Pillar II — Industrial Transformation, Investment Economics and National Strategic Assets

Chapter 4 — Refinery Operations, Production Flexibility and Short-Term Market Intervention

Strategic judgment: Europe’s ability to increase diesel and aviation-fuel production depends primarily on refinery configuration, processing-unit availability, hydrogen supply and feedstock compatibility, rather than nominal crude-processing capacity

The European Commission’s decision to examine measures capable of increasing refinery output in response to elevated diesel and aviation-fuel prices raises a fundamental operational question that cannot be resolved through aggregate capacity statistics or political commitments: how much additional middle-distillate production can European refineries actually deliver without compromising fuel quality, operational reliability or the economic viability of existing installations? The problem is considerably more complex than the distinction between operating and idle crude-distillation capacity would suggest, because modern petroleum refining is an interconnected manufacturing process in which different products compete for processing capacity, hydrogen, utilities and valuable intermediate streams. Increasing refinery throughput does not necessarily produce an equivalent increase in diesel or aviation fuel, while changes intended to maximise one product can affect gasoline, naphtha, fuel oil and petrochemical-feedstock production. The strategic relevance of refining therefore lies not merely in possessing industrial installations capable of processing crude, but in maintaining the technical ability to select suitable feedstocks, adjust production within safe operating limits, meet stringent product specifications and deliver commercially usable quantities of the fuels that matter most for transport and defence.

The operational evidence also imposes an important limit on the short-term expectations surrounding the October 2026 initiative. In its 29 September assessment, the Commission reported that European refineries were operating near maximum capacity, suggesting that substantial increases in output would require more than the straightforward utilisation of idle crude-distillation units. The scope for additional production depends instead on refinery-specific opportunities: reducing avoidable operating interruptions, adjusting crude blends, improving conversion yields, optimising intermediate-product routing, addressing hydrogen constraints and removing bottlenecks in blending, storage and distribution. Such interventions may increase effective production, but their costs and achievable volumes vary considerably between installations. A refinery with sophisticated hydrocracking and hydrotreating facilities may possess different options from a simpler plant whose distillation capacity exceeds its downstream conversion capability. Consequently, any European programme designed to increase middle-distillate output must proceed from a technical assessment of individual installations rather than assume that all nominal refinery capacity is equally flexible. Oil Coordination Group: Continued concern about prices while supply remains stable — European Commission — September 2026

Crude selection, refinery complexity and the economics of middle-distillate production

Crude selection is the first material constraint on refinery flexibility. Petroleum feedstocks differ in density, sulphur content, acidity, contaminant concentrations and the distribution of hydrocarbons across boiling ranges, meaning that apparently interchangeable crude deliveries may require different processing conditions and yield different proportions of valuable products. Lighter crude grades can produce relatively high quantities of lighter fractions, whereas heavier crude grades typically require more intensive conversion to maximise transport-fuel output. High-sulphur feedstocks impose additional desulphurisation requirements, increasing hydrogen consumption and affecting both operating expenditure and refinery emissions. A refinery’s economic performance therefore depends on the relationship between crude acquisition costs, conversion capabilities and the market value of its finished products, while its strategic flexibility depends on the range of feedstocks it can process without exceeding operational, environmental or quality limits.

The distinction is especially consequential when Europe attempts to replace disrupted crude imports. An alternative supply contract does not automatically provide an equivalent replacement for the lost feedstock if the incoming crude changes the distribution of intermediate streams or places greater pressure on sulphur-removal and conversion equipment. At an installation whose downstream units are already approaching maximum utilisation, increasing crude throughput may create additional low-value intermediate products without producing the intended increase in diesel or jet fuel. Conversely, a more complex installation can sometimes use its conversion capabilities to preserve product yields while processing a wider range of crude grades, although doing so may increase energy consumption, hydrogen demand and maintenance requirements.

The Sarroch refinery in Italy provides a documented example of the relevance of configuration and feedstock flexibility. Its operator describes an installation with approximately 300,000 barrels per day of crude-processing capacity, a Nelson Complexity Index of 11.7 and the ability to process approximately 50 crude varieties originating from more than 25 countries. The Nelson index is a comparative measure of the capital intensity and sophistication of refinery conversion equipment relative to basic crude distillation; it is not a direct measure of profitability, military fuel production or operational resilience. Nevertheless, an installation combining a broad crude-processing envelope with advanced conversion equipment possesses potentially valuable production options that a less complex refinery may lack. The security value of those options must still be verified against actual product yields, maintenance performance and feedstock accessibility. Company Profile — Saras — official corporate disclosure The Sarlux Refinery — Sarlux — official technical disclosure.

Refinery configuration	Principal technical function	Relevance to middle-distillate production	Operational constraint
Atmospheric crude distillation	Separates crude into fractions according to volatility	Produces intermediate streams suitable for subsequent processing	Throughput and crude composition determine available fractions
Vacuum distillation	Recovers heavier fractions under reduced pressure	Supplies conversion units with heavier intermediate feedstocks	Requires compatible downstream processing capacity
Hydrocracking	Converts heavier hydrocarbons into lighter, higher-value products using hydrogen	Can be configured to favour diesel and aviation-range components	Hydrogen availability, catalyst condition, pressure and feed quality
Fluid catalytic cracking	Converts heavy fractions, often favouring lighter products	Contributes to overall refinery economics and intermediate-product balance	Product distribution cannot be freely redirected towards diesel
Hydrotreating	Removes sulphur, nitrogen and other contaminants	Essential for compliant diesel and aviation-fuel components	Hydrogen supply, catalyst activity and unit capacity
Catalytic reforming	Produces high-octane gasoline components and hydrogen-rich process streams	Can contribute to internal hydrogen integration	Depends on feedstock and operating configuration
Delayed coking or other residue conversion	Converts heavy residual material	May increase recoverable intermediate streams for further processing	High capital intensity, energy demand and downstream bottlenecks
Hydrogen production	Supplies hydrogen for hydroprocessing	Supports deep desulphurisation and conversion	Natural gas, electricity, water, emissions and plant availability
Blending and product treatment	Combines compliant components into saleable fuels	Determines final diesel and jet-fuel availability	Specifications, component compatibility and storage segregation
Storage and product dispatch	Holds and transfers finished fuels	Converts production into commercially and operationally deliverable supply	Tank capacity, loading infrastructure and transport connections

This technical differentiation has important implications for industrial policy. If European authorities wish to maintain the production of strategically important middle distillates, investment priorities should be based on the marginal additional quantity of compliant fuel that a proposed intervention can deliver, the duration for which that output can be sustained and the reliability of the supporting infrastructure. Improving the availability of a hydrogen plant or removing a hydrotreater bottleneck may be economically preferable to increasing crude-distillation capacity at a facility whose downstream processing units are already fully utilised. Equally, a refinery upgrade that increases total throughput but produces relatively little additional jet fuel could be less valuable for aviation security than an investment in conversion flexibility or the physical distribution of existing aviation-fuel production. Such distinctions are essential if public authorities are to avoid financing nominal capacity increases that do not materially improve the supply of strategically necessary products.

Middle-distillate yields and the limitations of operational optimisation

The European Commission’s concern with diesel and aviation fuel requires attention to the fact that these products occupy neighbouring but technically distinct parts of the petroleum distillation range. Jet-fuel blending components must satisfy aviation requirements covering characteristics such as freezing point, flash point, thermal stability, contaminants and other quality parameters, while automotive diesel is governed by its own set of standards, including ignition quality, sulphur content, density and low-temperature performance. Although refinery operators can adjust cut points and downstream processing conditions within defined limits, the ability to redirect hydrocarbon streams between products is constrained by these standards and by the characteristics of the available intermediate fractions. Maximising jet-fuel production may reduce the volume of material available for diesel blending, and increasing diesel output may affect gasoline or other product streams. These adjustments also depend on seasonal product requirements and the composition of the crude being processed.

This creates a significant distinction between technical flexibility and economically sustainable flexibility. A refinery might be capable of producing additional jet fuel through changes in operating conditions, but the resulting product slate could be less profitable, consume more hydrogen or impose additional processing requirements. A temporary commercial response to high aviation-fuel prices may therefore be feasible without being appropriate as a permanent industrial operating strategy. Conversely, a refinery may possess technically available production options that are not commercially attractive under ordinary market conditions but become strategically valuable during a crisis. The justification for preserving those options depends on their incremental contribution to supply security and the costs of maintaining the necessary equipment, skills and feedstock arrangements.

A useful quantitative screening methodology should distinguish three separate measures: crude throughput, conversion-unit utilisation and finished-product yield. Crude throughput measures the quantity of feedstock processed; conversion-unit utilisation identifies whether the equipment needed to manufacture higher-value products has remaining capacity; and finished-product yield measures the amount of saleable diesel or aviation fuel produced relative to the relevant input. Without these distinctions, governments risk treating refinery operating rates as a direct measure of strategic fuel availability. They also risk overlooking installations where comparatively modest investments in unit reliability or product-treatment capacity could deliver substantial operational benefits.

Maintenance, reliability and the preservation of industrial competence

Refinery maintenance is a further determinant of short-term output. Major processing units require periodic inspection, catalyst replacement, equipment repairs, safety testing and regulatory compliance work, while unplanned outages can remove capacity irrespective of nominal operating rates. The relationship between maintenance and security is therefore more complex than the proposition that scheduled shutdowns should be postponed during periods of elevated fuel prices. Delaying necessary maintenance can temporarily preserve production, but it can also increase the probability of more serious equipment failure, accelerate deterioration and create safety risks. A security-oriented production strategy should consequently distinguish maintenance that can safely be rescheduled from work essential to preserving the long-term reliability of the installation.

The economic consequences extend beyond immediate lost throughput. Refineries require personnel with specialised experience in process control, mechanical integrity, instrumentation, hydroprocessing, utilities, product quality and hazardous-material management. These capabilities develop through prolonged operational experience and cannot be restored immediately following a closure. A company considering the retirement of an installation therefore makes a decision that may eliminate both physical equipment and a concentration of technical knowledge. Although some personnel and technologies can be transferred to renewable-fuel facilities or other industrial activities, the transfer is not automatically complete because conventional refining and biorefining retain different equipment configurations, process hazards and feedstock-management requirements. Preserving strategic industrial capacity requires a realistic assessment of which competencies remain essential, which can be transferred and which may disappear if conventional operations cease.

Hydrogen and utilities: the hidden constraints on production flexibility

Hydrogen is an indispensable input for much of modern transport-fuel processing, particularly where sulphur removal and hydrocracking are required. Refineries may obtain hydrogen from catalytic reforming, dedicated hydrogen-production facilities or external suppliers, and the configuration of those systems affects the extent to which throughput and product yields can be adjusted. Increasing the severity of hydroprocessing or converting more heavy fractions into lighter products can raise hydrogen requirements, while the availability and cost of natural gas, electricity and steam influence both operating expenditure and emissions. These dependencies mean that refinery resilience cannot be evaluated solely through crude-import diversification. A facility may have access to feedstocks and functioning distillation equipment but still encounter production constraints because of disruptions in gas supply, electricity, hydrogen production or cooling systems.

The same relationship becomes more important when conventional refineries integrate renewable feedstocks. Hydrotreating waste oils, vegetable oils and animal fats requires substantial hydrogen management, appropriate pretreatment and process configurations capable of handling chemically different inputs. Such investments may create opportunities to share infrastructure and industrial expertise with existing refining operations, but they also introduce new competition for utilities, storage and hydrogen unless the conversion is designed with sufficient supporting capacity. Eni’s planned Sannazzaro biorefinery illustrates this interaction: the company has announced that hydrogen for the converted processing unit will be supplied by existing installations, while logistical infrastructure and connections to Lombardy airports will be adapted to accommodate the new production system. The project demonstrates how partial conversion can reuse existing industrial infrastructure, although its long-term effect on overall operating flexibility will depend on the actual performance of the integrated facilities. Eni: the investment in the development of biorefining in Sannazzaro de’ Burgondi is confirmed — Eni — February 2026.

Short-term output expansion: what can realistically be achieved

The Commission’s proposed short-term production response should be evaluated against the different implementation horizons of refinery interventions. Operational optimisation and adjustments to crude sourcing may be possible within existing permits and equipment limitations, while larger investments in processing units, hydrogen systems or product-storage infrastructure require engineering, procurement, construction and commissioning. The distinction is important because measures capable of influencing market supply within weeks or months are not interchangeable with investments whose benefits may appear only after several years. Price-related concerns therefore require a separate policy response from structural capacity retention, even when both objectives are discussed within the same institutional initiative.

Intervention	Technical mechanism	Indicative implementation horizon	Strategic benefit	Principal limitation
Operating-condition optimisation	Adjusts unit settings within safe limits	Days to weeks where technically feasible	Marginal improvement in selected product yields	Limited by equipment, quality specifications and operating margins
Crude-slate adjustment	Changes feedstock composition	Weeks to months, depending on procurement and logistics	Potential increase in suitable middle-distillate streams	Crude compatibility, cost and availability
Maintenance coordination	Optimises shutdown scheduling	Weeks to months	Improves continuity of available capacity	Safety-critical maintenance cannot be avoided
Intermediate-stream optimisation	Redirects suitable fractions through existing units	Weeks to months	Improves product balance	Hydrogen, conversion and blending constraints
Hydrogen-system improvements	Increases hydrogen availability or reliability	Months to years	Supports hydrotreating and hydrocracking	Capital expenditure, utilities and emissions
Unit debottlenecking	Removes local processing restrictions	Months to several years	Increases sustained compliant-fuel production	Engineering complexity and installation shutdown requirements
New conversion equipment	Adds hydroprocessing or other processing capability	Multiple years	Structural change in refinery product flexibility	High capital requirements and demand uncertainty
Distribution and storage expansion	Improves finished-product handling and delivery	Months to several years	Increases physically accessible fuel supply	Permitting, land, logistics and financing

The implementation horizons are analytical engineering categories, not commissioned project schedules or verified estimates for particular European facilities. They should not be used to infer additional production volumes without plant-specific data.

The principal economic consideration is that refinery operators respond to expected margins across the entire product slate, not to a government preference for increased output of a single product. High diesel or aviation-fuel prices can encourage production where technical flexibility exists, but the commercial incentive may be insufficient when additional output requires disproportionate expenditure on hydrogen, utilities or processing equipment. Equally, temporary increases in margins may not justify long-lived capital investments if operators expect conventional fuel demand to decline or regulatory obligations to change. The Commission’s short-term initiative may consequently provide valuable market coordination, but lasting improvements in middle-distillate resilience require credible expectations concerning investment recovery, regulatory obligations and the future role of existing refining installations.

Chapter 4 — Key judgments

The European refining industry’s immediate production flexibility is constrained by the interaction of feedstock properties, conversion-unit capacity, hydrogen availability, product standards and equipment reliability. The Commission’s observation that refineries were operating near maximum capacity in September 2026 indicates that large short-term increases in diesel and aviation-fuel production cannot be assumed without facility-specific technical evidence. Operational optimisation may produce incremental gains, but substantial and sustainable increases require investment in processing flexibility, utilities and distribution infrastructure. The strategic industrial-policy priority should therefore be the preservation and improvement of deliverable, specification-compliant middle-distillate capacity, not the indiscriminate expansion of nominal crude-processing capacity.

Chapter 5 — Biofuels, E-Fuels and the Economics of Strategic Conversion

Strategic judgment: renewable liquid fuels can preserve parts of Europe’s industrial and logistics infrastructure, but conversion is not synonymous with preserving conventional refining capacity, and the economics of alternative fuels remain highly dependent on feedstocks, hydrogen, electricity and regulatory demand

The transformation of European refining towards renewable diesel, sustainable aviation fuels and synthetic hydrocarbons represents a potentially important mechanism for reconciling decarbonisation with industrial continuity, but its strategic value cannot be established simply by replacing conventional refinery capacity with an equivalent nominal quantity of biorefining capacity. Conventional refineries and renewable-fuel installations process different feedstocks, use different combinations of equipment and produce products subject to distinct technical and regulatory requirements. Although some renewable hydrocarbons can be used within existing engines and distribution systems, their production depends on the availability of suitable biological or synthetic inputs, the energy required for conversion and the economic conditions under which the resulting fuels can compete with petroleum-derived alternatives. The distinction becomes particularly important when evaluating Europe’s military and industrial resilience because a conventional refinery may provide access to multiple petroleum-product streams, while a converted biorefinery may possess a narrower feedstock base or require a more specialised supply chain. A successful transformation strategy must therefore assess the productive capabilities retained, the new dependencies introduced and the extent to which the resulting fuel system can operate reliably during international market disruption.

The policy environment is already creating a substantial demand signal for renewable aviation fuels. Under Regulation (EU) 2023/2405, the ReFuelEU Aviation framework requires aviation-fuel suppliers to ensure that the fuel made available at covered EU airports contains increasing minimum shares of sustainable aviation fuels. The minimum begins at 2% in 2025 and rises to 6% in 2030, 20% in 2035, 34% in 2040, 42% in 2045 and 70% in 2050. The framework also establishes specific requirements for synthetic aviation fuels, including an average synthetic share of 1.2% over the 2030–2031 period, subject to a minimum of 0.7% in each year, followed by progressively higher requirements. These obligations provide a legally defined demand trajectory that differs fundamentally from a voluntary corporate decarbonisation target. They do not, however, guarantee that every announced production project will be completed, that sufficient eligible feedstocks will be available at competitive prices or that all sustainable aviation fuels will be manufactured inside the European Union. ReFuelEU Aviation — European Commission — official regulatory overview Regulation (EU) 2023/2405 — European Parliament and Council — October 2023.

Renewable-fuel mandates and the industrial demand trajectory

Year or compliance period	Minimum SAF share	Synthetic aviation-fuel requirement	Regulatory significance
2025	2%	No separate synthetic minimum in Annex I	Initial EU SAF supply obligation
2030–2031	6%	Average 1.2% over the period; at least 0.7% annually	First synthetic aviation-fuel compliance period
2032–2034	6%	Average 2.0% over the period, with annual minima specified	Increasing synthetic-fuel obligation
2035	20%	5%	Major increase in total SAF and synthetic requirements
2040	34%	10%	Substantial expansion of renewable aviation-fuel demand
2045	42%	15%	Further synthetic-fuel integration
2050	70%	35%	Long-term regulatory endpoint

Source: Regulation (EU) 2023/2405, Annex I — European Parliament and Council — October 2023. Values are statutory minimum shares, not forecasts of actual European production.

The relevance of these requirements extends beyond the aviation sector because they influence refinery capital allocation, feedstock procurement, hydrogen demand and the expected value of renewable-fuel production. A company deciding whether to convert an existing refinery unit into renewable-fuel production can evaluate the legally mandated market for sustainable aviation fuel, but it must also consider whether demand growth will be matched by sufficient supply of eligible raw materials and whether the expected selling price will cover production and financing costs. These questions become more difficult where several producers compete for the same categories of waste oils, fats or other biological inputs, especially when the associated supply chains extend beyond Europe. Regulatory demand can therefore encourage investment while simultaneously increasing the commercial value and strategic importance of scarce feedstocks.

Hydrotreated renewable diesel and the HEFA pathway

Hydrotreated vegetable oil, commonly described as HVO, and hydroprocessed esters and fatty acids, or HEFA, represent established technological approaches to producing renewable hydrocarbon fuels from suitable biological feedstocks. The processes use hydrogen and catalytic treatment to remove oxygen and transform feedstocks into hydrocarbons that can be further processed into fuels meeting applicable specifications. Depending on the configuration of the installation and the fractionation of its output, such processing can produce renewable diesel and suitable aviation-fuel components, alongside other hydrocarbon products. The use of existing refining expertise and selected industrial infrastructure is one reason why conversion projects have become particularly relevant to companies that already possess refinery sites, hydrogen systems, storage facilities and access to fuel markets.

The strategic advantage of HVO and HEFA is that the final hydrocarbon products can offer a degree of compatibility with established transport equipment and distribution infrastructure, subject to the applicable fuel standards and operational approvals. This reduces some of the difficulties associated with replacing liquid fuels altogether, particularly in sectors where batteries or alternative propulsion systems cannot immediately deliver equivalent operational characteristics. The limitations are equally material. Feedstock availability is constrained by competing demand, collection logistics and sustainability requirements; hydrogen production can impose significant energy and emissions costs; and processing facilities must manage different contamination and pretreatment challenges from those associated with conventional crude oil. In addition, the ability to produce both renewable diesel and aviation-range components does not mean that every unit can independently maximise both products without economic or process trade-offs.

Eni’s Ecofining technology provides a concrete example of this industrial development. The company identifies its Venice and Gela installations as existing biorefineries using technology developed with Honeywell UOP, while its expansion programme includes Livorno, Sannazzaro and Priolo. Eni describes the processing of biological waste, residues, used cooking oils and other suitable raw materials into renewable hydrocarbon products and has positioned Enilive as the principal vehicle for expanding this industrial activity. The corporate strategy demonstrates the possibility of reusing portions of the existing refining system, but the evidence also shows why each conversion project must be assessed individually. A complete conversion may eliminate conventional crude processing at a site, while a partial conversion can preserve conventional operations alongside new renewable-fuel production. These alternatives have different implications for strategic fuel security, labour requirements, feedstock sourcing and future capital investment. Production of biofuels in Italy — Eni — official corporate disclosure Eni’s position on biomass — Eni — official corporate disclosure.

Synthetic fuels and the industrial significance of electricity and hydrogen

Synthetic hydrocarbon fuels introduce a different set of technological and economic dependencies. Their production can involve the conversion of hydrogen and a suitable carbon source into synthetic hydrocarbons through processes that require substantial energy input, chemical synthesis and subsequent product upgrading. When the hydrogen is produced by electrolysis using qualifying renewable electricity and the carbon source satisfies the relevant regulatory criteria, the resulting fuels may contribute to the EU’s renewable-fuel objectives. Their principal attraction is the possibility of producing liquid hydrocarbons compatible with parts of existing fuel infrastructure while reducing dependence on conventional fossil feedstocks. However, the pathway introduces major requirements for electricity generation, hydrogen production, carbon sourcing, synthesis equipment and industrial integration.

The economic significance of these requirements is that synthetic-fuel competitiveness depends on several interconnected prices and utilisation factors. Electricity is a major input to electrolysis, while electrolyser capital expenditure must be recovered over the hours during which the equipment operates. The cost of obtaining and processing carbon dioxide depends on its source, capture method, purity and associated energy requirements. Subsequent synthesis, refining and product handling add further expenditure, while the final product must comply with the appropriate aviation or transport-fuel specification. These dependencies mean that synthetic fuels cannot be evaluated on the basis of electricity prices alone or treated as automatically cheaper once renewable generation capacity expands. A credible investment assessment must consider the delivered cost of eligible electricity, capital utilisation, hydrogen production efficiency, carbon sourcing, synthesis performance and the value of regulatory compliance.

For the European refining industry, the synthetic-fuel pathway creates both an opportunity and a structural competitive challenge. Existing refineries may possess experience in hydrocarbon processing, blending, quality assurance and product distribution that can support integration with synthetic-fuel production. Nevertheless, future investment in synthetic fuels may be geographically attracted towards locations offering low-cost renewable electricity, suitable carbon sources, industrial infrastructure and favourable financing conditions. Such locations need not coincide with Europe’s existing refinery centres. The long-term risk is therefore that Europe could preserve some downstream fuel-handling capabilities while importing an increasing share of the renewable or synthetic hydrocarbons needed to satisfy its own regulatory mandates. Conversely, the development of competitive domestic synthetic-fuel production could diversify Europe’s industrial feedstock base and create new opportunities for integration with refining and chemical infrastructure. Neither outcome is predetermined by current legislation.

Feedstock scarcity and the internationalisation of renewable-fuel dependence

The expansion of renewable-fuel production creates an important new security question: whether Europe is replacing one form of imported feedstock dependence with another. Conventional refineries rely predominantly on crude oil, whereas biorefineries require biological feedstocks whose availability depends on agricultural production, waste collection, rendering, food-processing industries and international trade. Some categories of raw material are subject to sustainability restrictions or competing demand from food, chemicals and other energy applications. Production capacity therefore cannot be interpreted as evidence of feedstock security unless the operator possesses commercially credible and sustainable sourcing arrangements.

This issue becomes particularly important for waste-based fuel pathways. Used cooking oil, animal fats and other residues are attractive because they can contribute to regulatory sustainability objectives, but their collection and certification require traceability and compliance controls. Increasing demand for such materials can raise procurement costs and strengthen incentives for international sourcing, while differences in national collection systems affect the economic availability of domestic feedstocks. The strategic benefit of a European biorefinery consequently depends not only on its location and nominal capacity, but also on the resilience and integrity of the feedstock supply chain supporting its operation.

From a security perspective, diversity of feedstocks can be valuable because it reduces dependence on a single commodity or geographical source. However, diversification must be evaluated against actual technical compatibility and regulatory eligibility. A biorefinery capable of processing several types of residue may possess greater commercial flexibility than one dependent on a narrow input category, but that benefit can be reduced if alternative feedstocks require expensive pretreatment, increase hydrogen consumption or produce different fuel yields. The relevant policy question is whether domestic and international biomass supply chains can sustain planned capacity under normal conditions and remain accessible during a major external disruption.

The economics of retaining industrial capacity during conversion

A central weakness in simplistic discussions of refinery transformation is the assumption that the conversion of one million tonnes of conventional refining capacity into one million tonnes of renewable-fuel capacity preserves an equivalent industrial capability. Such an equivalence is not technically justified. Conventional crude-processing capacity and renewable-feedstock-processing capacity measure different industrial processes, while the resulting product slate may differ substantially. A conventional refinery may produce diesel, gasoline, aviation fuel, naphtha, liquefied petroleum gases and other products, whereas a renewable-fuel installation may specialise in a narrower set of hydrocarbon outputs. Its capacity may also be described using feedstock throughput rather than finished-product output, requiring additional care when comparing company disclosures.

This distinction has direct implications for military and industrial-security planning. If a conventional refinery is converted completely, policymakers must determine which former capabilities disappear, which new capabilities emerge and whether the resulting supply system can satisfy the technical requirements of strategically important consumers. If an installation is converted partially, the assessment should identify whether conventional production capacity remains unchanged, whether utilities and storage are shared, and how maintenance or operating interruptions in one part of the facility could affect the other. In either case, the economic decision should reflect the future value of the installation as an integrated industrial asset rather than simply record its nominal processing capacity before and after conversion.

Eni’s Sannazzaro project provides an especially relevant example because the company explicitly states that the planned renewable-fuel installation will not reduce the refinery’s existing conventional-fuel production capacity. The project therefore represents an attempt to add renewable-fuel production while preserving the conventional industrial function, although the extent of operational independence and realised product flexibility will become clear only after commissioning. By contrast, the conversion of Livorno represents a different industrial pathway, involving the transformation of a conventional refining site into a biorefinery. These two projects illustrate why the European Commission’s future framework should distinguish additional renewable-fuel capability from substitution of existing conventional production. Eni: Sannazzaro biorefining investment confirmed — Eni — February 2026.

Comparative technological assessment

Production pathway	Principal feedstock	Main industrial inputs	Potential fuel products	Strategic advantage	Principal constraint
Conventional petroleum refining	Crude oil	Heat, electricity, hydrogen and processing chemicals	Diesel, jet fuel, gasoline, naphtha and other petroleum products	Established scale and multiple-product flexibility	Imported crude dependence, emissions and transition-related investment uncertainty
HVO renewable diesel	Suitable oils, fats and residues	Hydrogen, pretreatment and catalytic processing	Renewable diesel and associated products	Compatibility with existing diesel applications under applicable standards	Eligible feedstock supply and hydrogen costs
HEFA aviation-fuel production	Suitable lipid-based feedstocks	Hydrogen, catalytic conversion and fractionation	Aviation-range synthetic paraffinic kerosene and renewable diesel fractions	Established renewable aviation-fuel pathway	Feedstock competition, yield optimisation and blending limitations
Biomass-to-liquid fuels	Suitable biomass	Gasification, synthesis and upgrading	Synthetic hydrocarbons and transport fuels	Potential diversification beyond lipid feedstocks	Capital intensity, scale-up and feedstock logistics
Power-to-liquid synthetic fuels	Hydrogen and eligible carbon source	Electricity, electrolysis, carbon processing and synthesis	Synthetic aviation fuel and other hydrocarbons	Reduced direct dependence on crude oil	Electricity demand, hydrogen costs and large-scale deployment
Refinery co-processing	Selected renewable inputs combined with conventional streams	Existing refinery units with suitable adaptations	Conventional and renewable-content products	Potential use of existing infrastructure	Regulatory accounting, technical limits and feedstock compatibility

The technological pathways should not be ranked solely by their nominal production costs because their regulatory eligibility, product specifications, infrastructure requirements and ability to provide secure supply are different. A pathway that is competitive under one set of feedstock and electricity prices may become uneconomic under another, while a technology with relatively high production costs may still possess strategic value where it diversifies supply or provides a product that cannot otherwise be obtained reliably. The relevant investment analysis must therefore combine commercial production costs with regulatory compliance requirements and the value of maintaining industrial capabilities under stress.

Eni’s 2026 investment commitments as an indication of the emerging industrial model

The most consequential Italian evidence is found in Eni’s March 2026 Capital Markets Update and the company’s February investment announcement. Eni reported a programme of biorefining projects with final investment decisions at Livorno, Sannazzaro and Priolo, alongside the expansion of Venice and international developments in South Korea and Malaysia. The company identified Livorno as a project with approximately 500,000 tonnes of annual capacity and a scheduled December 2026 start-up, Venice expansion as a project intended to reach up to 600,000 tonnes of capacity in 2027, and Sannazzaro and Priolo as projects scheduled for 2028, with respective capacities of 550,000 and 500,000 tonnes. These figures represent corporate project disclosures and forward-looking capacity plans, not verified operating production at the October 2026 cut-off.

Eni/Enilive project	Announced capacity	Investment decision	Announced start-up	Industrial significance
Livorno	Approximately 500,000 tonnes/year	January 2024	December 2026	Conversion of conventional site to biorefining
Venice expansion	Up to 600,000 tonnes/year total site capacity	February 2026	2027	Capacity expansion and debottlenecking
Priolo	500,000 tonnes/year	January 2026	2028	New biorefinery with Q8 Italia
Sannazzaro	550,000 tonnes/year of feedstock capacity	January 2026	2028	Partial conversion without planned reduction in conventional fuel capacity
Daesan/Seosan, South Korea	400,000 tonnes/year	July 2024	2027	International renewable-fuel manufacturing investment
Pengerang, Malaysia	650,000 tonnes/year	July 2024	2028	International renewable-fuel production partnership

Source: 2026 Capital Markets Update — Eni — March 2026, p. 49. These are project capacities, not a verified additive measure of new Italian finished-fuel production. Venice’s figure is a planned total after expansion; Sannazzaro’s disclosure specifies feedstock capacity.

The corporate strategy also illustrates the geographical implications of the renewable-fuel transition. By investing in Malaysia and South Korea alongside Italian projects, Eni is developing an international production system that can respond to demand growth and feedstock availability in several markets. Such investments may improve the company’s competitive position and diversify its commercial portfolio, but they should not automatically be interpreted as increasing the production capacity physically available within the European Union. For European industrial-security purposes, the location of production remains relevant because fuel manufactured abroad may depend on international transport routes and import availability, even when the producer is headquartered in Europe. The strategic significance of European renewable-fuel investment should therefore be measured through production commissioned within the Union, access to secure feedstocks, product availability and the ability to deliver fuels to European consumers under stress.

Chapter 5 — Key judgments

Renewable diesel, HEFA sustainable aviation fuels and synthetic hydrocarbons offer important opportunities for preserving Europe’s liquid-fuel capabilities while reducing reliance on conventional fossil feedstocks, but their economic and strategic benefits depend on the resilience of new supply chains and the actual industrial capabilities retained during conversion. ReFuelEU Aviation establishes a substantial and legally defined demand trajectory, while Eni’s investment programme demonstrates that European companies are already committing capital to renewable-fuel production. Nevertheless, announced capacity is not equivalent to commissioned output, and renewable-feedstock processing cannot be treated as a direct replacement for conventional refining without a detailed assessment of product yields, operating flexibility and supply-chain dependence. The most credible transformation model is one that distinguishes complete conversion, partial conversion and additional renewable capacity, allowing policymakers to determine whether decarbonisation investments genuinely strengthen or inadvertently reduce strategically necessary fuel-production capabilities.

Chapter 6 — Italy’s Refining System: Industrial Assets, Conversion and Closure Exposure

Strategic judgment: Italy possesses one of Europe’s most consequential combinations of conventional refining, conversion technology and Mediterranean logistics, but its strategic position will depend on preserving differentiated industrial capabilities rather than treating every refinery and biorefinery as interchangeable

Italy’s position within the European refining system is unusually important because its industrial assets perform several functions that are frequently combined in national energy statistics but have distinct implications for industrial and defence security. Conventional refineries supply petroleum-derived transport fuels and other industrial products; biorefineries manufacture renewable hydrocarbons from selected alternative feedstocks; integrated refining and petrochemical complexes contribute to wider industrial supply chains; and major maritime and pipeline installations connect processing capacity with domestic and international markets. The strategic significance of these activities depends on their physical interaction, the technical characteristics of each facility and their location relative to critical consumption centres. Italy should therefore not be assessed as a single refining market with an undifferentiated quantity of crude-processing capacity. Its industrial system contains facilities with materially different processing flexibility, commercial exposure, feedstock requirements, transport connections and investment trajectories. The central policy challenge is to determine whether the transformation of this system will produce an adaptable combination of conventional and renewable-fuel capabilities or progressively substitute specialised installations for broader refining functions without a corresponding assessment of national fuel-security requirements.

Eni’s official description of its Italian industrial activities identifies Sannazzaro de’ Burgondi, Taranto and Livorno as the company’s three conventional refining locations, together with its 50% interest in the Milazzo refinery. The company also operates existing biorefining activities at Venice and Gela and has announced further investments involving Livorno, Sannazzaro and Priolo. The distinction between these different corporate interests and industrial sites is important because the wider Italian refining system also includes privately controlled installations whose investment decisions cannot be inferred from Eni’s strategy. Saras, acquired by Vitol in 2024, operates the major Sarroch refinery in Sardinia, while the Priolo area contains several industrial activities that should not be collapsed into a single refinery or conversion project. Eni’s announced biorefinery at Priolo, developed with Q8 Italia, is a distinct investment from the conventional refining operations associated with the broader Priolo industrial area. An accurate assessment must therefore distinguish the legal operator, industrial installation and production process before drawing conclusions about ownership, conversion or closure risk. Our work in Italy — Eni — official corporate disclosure Company Profile — Saras — official corporate disclosure The conversion of the Priolo industrial site — Eni — official corporate disclosure.

Sannazzaro de’ Burgondi: preserving conventional refining while adding renewable production

Sannazzaro is strategically important because it combines substantial conventional refining capacity, advanced processing technology and access to the northern Italian industrial system. Eni reports a balanced primary refining capacity of 180,000 barrels per day and a conversion index of 54%, while describing an industrial configuration incorporating hydrocracking, hydrogen production, gasification, deasphalting and Eni Slurry Technology. The facility is situated within the Turin–Milan–Genoa industrial triangle, along the pipeline corridor connecting the Genoa area with Switzerland, and benefits from an established supply and distribution network. These characteristics give the installation a differentiated role within Italy’s industrial geography: it is an inland processing centre connected to major transport and industrial markets rather than a refinery whose commercial function depends exclusively on immediate proximity to a maritime terminal. Its ability to produce conventional fuels from complex feedstocks is therefore relevant not only to domestic petroleum-product supply but also to the resilience of northern Italian industrial logistics.

The most important feature of the announced conversion is that Eni has explicitly stated that the project will not reduce the existing production capacity for traditional fuels. In February 2026, the company confirmed the final investment decision for the conversion of selected units, including the HDC2 hydrocracker, into a renewable-fuel installation using Ecofining technology. The project provides for approximately 550,000 tonnes per year of renewable feedstock-processing capacity, with flexibility to produce HVO diesel and sustainable aviation fuel, and is scheduled for completion in 2028. The company also identifies adaptations to infrastructure and airport connections in Lombardy as part of the transformation. These facts make Sannazzaro a particularly relevant example of industrial coexistence: rather than replacing the conventional refinery wholesale, the company intends to add renewable-fuel production through partial conversion while maintaining its existing traditional-fuel capacity. The distinction does not guarantee that operating economics will remain favourable indefinitely, but it demonstrates an industrial design that attempts to reconcile energy-transition investment with retention of established refining capabilities. The Sannazzaro de’ Burgondi refinery — Eni — official technical disclosure Eni confirms Sannazzaro biorefining investment — Eni — February 2026.

The investment also illustrates the complexity of industrial financing. Eni’s site disclosure refers to a €500 million European Investment Bank financing agreement associated with the conversion, placing the project within a wider relationship between European financial institutions and energy-transition investment. Such financing is relevant because it can support the capital requirements of a specific transformation project, but it should not be interpreted as a general subsidy for conventional refinery retention or as evidence that all of Sannazzaro’s future operating expenditure will be underwritten. The financial and strategic questions remain separate: the renewable-fuel project must satisfy its own commercial and regulatory conditions, while the conventional refinery continues to depend on the economics of crude processing and finished-product markets. The value of the combined installation arises from the potential to share industrial expertise, utilities and logistics infrastructure while retaining a diverse product portfolio. Whether that integration delivers durable competitive advantages will depend on the operating performance and cost allocation of the completed facilities.

Taranto: a strategic connection between domestic crude production and southern Italian fuel markets

Taranto occupies a different position because it is directly connected to upstream Italian oil production through the pipeline linking the refinery with the Val d’Agri Oil Centre in Basilicata. Eni identifies the connection as approximately 137 kilometres long and reports balanced primary refining capacity of 104,000 barrels per day. The facility has operated since 1967 and produces diesel, aviation fuel, gasoline, naphtha, fuel oil, bitumen and liquefied petroleum gas. Finished products can be dispatched through maritime facilities and land-loading infrastructure, providing multiple delivery routes. Eni also reports more than 400 personnel working at the refinery and identifies a proposed 10 MW electrolyser associated with a green-hydrogen project involving Enel Green Power. The company’s Italian-language site description additionally refers to the introduction of approximately five million tonnes of products into the market annually, a figure that should be interpreted according to Eni’s commercial and logistical definition rather than equated automatically with crude throughput. The Taranto refinery — Eni — official technical disclosure La raffineria di Taranto — Eni — official Italian-language disclosure.

Taranto’s strategic relevance arises partly from the connection between domestic crude production and refining capacity, which distinguishes it from facilities relying exclusively on international maritime or pipeline feedstocks. This relationship does not establish complete supply independence, since the refinery’s operating configuration, crude requirements and product markets extend beyond the volumes delivered from Val d’Agri, but it provides a tangible element of national upstream-downstream integration. The facility’s ability to manufacture aviation fuel and diesel, together with its maritime and land-distribution connections, also makes it relevant to a broader assessment of southern Italian industrial and transport resilience. In addition, Eni reports that the refinery participates in sustainable aviation-fuel production through co-processing selected used oils in existing refinery units, illustrating a different transition pathway from the complete conversion model adopted at Livorno. The strategic question is therefore whether Taranto’s combination of conventional processing, domestic crude connection, aviation-fuel production and emerging renewable-fuel technologies continues to support commercially sustainable operations.

Livorno: complete conversion and the substitution of industrial functions

Livorno presents a contrasting case because Eni has chosen to transform the conventional refinery into a biorefining installation, with approximately 500,000 tonnes per year of planned capacity and a start-up target of December 2026. The company reports that the final investment decision was taken in January 2024, indicating that the project was approved before the October 2026 European refining dialogue and should not be attributed to that subsequent policy initiative. Its relevance lies instead in demonstrating an established corporate response to the economics of conventional refining and the regulatory development of renewable-fuel markets. The conversion seeks to reuse industrial infrastructure and capabilities to produce renewable hydrocarbons, potentially preserving industrial employment and site functions that might otherwise be threatened by the declining competitiveness of certain conventional refining activities. 2026 Capital Markets Update — Eni — March 2026, p. 49.

From a strategic-security perspective, however, the conversion requires careful interpretation. A renewable-fuel plant can contribute to the availability of HVO and related products, but it does not automatically preserve all the industrial functions of the former refinery. The appropriate comparison concerns the future production of compliant transport fuels, associated logistics and the availability of feedstocks under stress, rather than a superficial comparison of nominal processing capacities expressed in tonnes per year. Livorno may therefore represent a successful industrial transformation in commercial and environmental terms while still requiring examination of the conventional products and processing capabilities that disappear. Whether such a change constitutes a net improvement in strategic fuel security depends on the remaining national refining system and its ability to compensate for lost product streams.

Venice and Gela: established biorefining and the transition to renewable-feedstock dependence

Venice and Gela provide Italy with operational experience in renewable-fuel manufacturing that predates the October 2026 refining dialogue. Eni identifies both installations as existing biorefineries using Ecofining technology, with production centred on renewable hydrocarbon fuels derived from suitable biological feedstocks. Their importance extends beyond their direct contribution to fuel markets because they demonstrate the practical integration of alternative feedstock logistics, hydrogen processing and conventional downstream fuel expertise within Italian industrial sites. Venice’s strategic relevance is reinforced by its position within the northern Adriatic industrial and transport system, while Gela provides an important southern Italian production base with access to Mediterranean logistics.

Eni’s March 2026 strategy envisages the expansion of Venice to as much as 600,000 tonnes of total annual capacity in 2027, following a final investment decision announced for February 2026. This is a planned total capacity after expansion, not an additional 600,000 tonnes to be added mechanically to existing production. The distinction is important because European industrial assessments frequently overstate future output by combining existing capacities, planned total capacities and incremental investments without reconciling their definitions. Gela remains relevant as an established production asset, but its strategic contribution must be assessed through operational performance, feedstock availability and product quality rather than assumptions about future capacity derived from other sites. Production of biofuels in Italy — Eni — official corporate disclosure 2026 Capital Markets Update — Eni — March 2026, pp. 45–49.

Milazzo and Priolo: the significance of Sicily’s differentiated industrial assets

Milazzo and Priolo demonstrate why Sicily’s refining system requires an analysis extending beyond Eni’s wholly controlled installations. Milazzo remains part of Eni’s Italian refining portfolio through its 50% participation, while the broader Priolo industrial area includes conventional refining and petrochemical activities under different corporate arrangements. These facilities occupy geographically important positions within the Mediterranean industrial system, but their strategic functions and investment risks must be assessed separately. It would be analytically incorrect to assume that a conversion project announced for one part of Priolo implies that all conventional refining activities in the area are being converted or withdrawn.

Eni’s Priolo project involves a partnership with Q8 Italia for a new biorefinery with 500,000 tonnes per year of announced capacity, planned for completion in 2028. The project uses part of an industrial area associated with the transformation of Versalis’ chemical activities and includes facilities for renewable-feedstock pretreatment and hydrogen production. The company describes the project as capable of producing renewable diesel and sustainable aviation fuel from suitable waste and residue feedstocks. Its planned industrial configuration differs from the conventional crude-refining operations associated with the wider Priolo area and should therefore be treated as an additional element in Sicily’s evolving industrial system, not as a comprehensive replacement assessment for all refining capacity located there. The conversion of the Priolo industrial site — Eni — official corporate disclosure Eni confirms Sannazzaro and Priolo biorefining investments — Eni — February 2026.

A defensible closure-risk assessment for Milazzo or the conventional Priolo refining system would require recent operator financial statements, utilisation data, maintenance investment, environmental obligations and formal corporate decisions. The evidence examined here does not establish a quantified probability of closure for either installation. Their exposure should therefore be evaluated through identifiable mechanisms such as refinery margins, future capital requirements, regulatory costs, feedstock access and the commercial attractiveness of alternative industrial uses. Assigning a numerical closure probability without those inputs would create an appearance of analytical precision unsupported by the available record.

Sarroch: Mediterranean industrial scale, processing complexity and the importance of corporate control

Sarroch is one of Italy’s most significant conventional refining assets. The refinery, operated by Sarlux within the Saras group, has a reported capacity of approximately 15 million tonnes per year, equivalent to around 300,000 barrels per day, and accounts for approximately 21% of Italian refining capacity according to the operator. Saras reports a Nelson Complexity Index of 11.7, reflecting substantial conversion capability, and identifies an integrated industrial system incorporating refining, petrochemical activities and electricity generation. The installation’s maritime location on the southwestern coast of Sardinia provides access to Mediterranean supply routes and export markets, while its ability to process a wide range of crude grades supports commercial flexibility. These characteristics make Sarroch particularly important in assessing Italy’s capacity to manufacture petroleum products at industrial scale from internationally sourced feedstocks. The Sarlux Refinery — Sarlux — official technical disclosure Refining — Saras — official corporate disclosure.

The integration of electricity production is an additional strategic feature. The operator describes a gasification combined-cycle installation with 575 MW of installed electrical capacity, linking refinery operations with a substantial energy-generation system. This integration may support industrial efficiency and create opportunities to recover energy value from refinery-related streams, although the specific contribution to emergency resilience depends on operating conditions, feedstock availability and the interdependence of the various units. The company’s public materials also identify substantial storage infrastructure, but different corporate disclosures refer to storage capacities using differing boundaries and definitions. For strategic assessment, crude storage, finished-product storage and total site tank capacity should be distinguished rather than combined without reconciliation.

Corporate ownership is equally relevant. Saras confirms that Vitol acquired the Moratti family’s shareholding in June 2024 and subsequently completed the acquisition and delisting process. The change places Sarroch within the ownership structure of a major international energy-trading group, potentially influencing crude procurement, commercial integration and product marketing. However, ownership by an international trading company does not automatically establish a future investment programme or guarantee long-term refinery retention. The relevant evidence would be found in formal capital allocation, maintenance decisions, operational performance and any announced restructuring measures. Sarroch’s industrial scale and complexity make it strategically significant, but its eventual policy treatment must depend on demonstrated production and distribution capabilities rather than its size alone.

Comparative screening of Italy’s principal assets

Facility	Operator or corporate relationship	Verified characteristic or announced project	Strategic industrial function	Principal issue requiring further assessment
Sannazzaro	Eni	180,000 b/d conventional capacity; 550,000 t/year planned renewable feedstock capacity	Northern industrial fuel supply; integrated conventional and renewable production	Commissioning and operating performance of partial conversion
Taranto	Eni	104,000 b/d capacity; 137 km Val d’Agri pipeline	Southern Italian refining, domestic crude integration and aviation-fuel production	Long-term competitiveness and hydrogen investment
Livorno	Eni/Enilive	Approximately 500,000 t/year planned biorefinery	Renewable-fuel production and site transformation	Replacement of former conventional product capabilities
Venice	Eni/Enilive	Planned expansion to up to 600,000 t/year total capacity	Renewable diesel and alternative-fuel production	Feedstock supply and realised post-expansion output
Gela	Eni/Enilive	Existing operational biorefinery	Southern Italian renewable-fuel manufacturing	Feedstock resilience and operating economics
Milazzo	Eni 50% interest	Conventional refining participation	Sicilian refining and Mediterranean supply	Updated production, financing and investment evidence
Priolo biorefinery project	Eni/Q8 Italia	500,000 t/year planned capacity	Renewable-fuel industrial development	Completion and separation from other Priolo operations
Sarroch	Saras/Vitol	300,000 b/d; Nelson index 11.7	Large-scale conventional refining and Mediterranean logistics	Future investment, commercial competitiveness and strategic supply role

The table deliberately avoids numerical closure probabilities because the disclosed evidence does not provide a sufficiently consistent financial and operational basis for estimating them. It also distinguishes crude-processing capacity from renewable-feedstock capacity, which must not be added as if they represented the same industrial measurement.

Italy’s strategic investment priorities

Italy’s industrial-policy problem is not simply to decide which existing refinery should remain open. It is to determine how conventional refining, renewable-fuel manufacturing and distribution infrastructure can be coordinated so that the country retains sufficient flexibility to respond to changing market demand and supply disruptions. Sannazzaro illustrates a partial-conversion model designed to preserve conventional output while adding renewable-fuel capability; Taranto demonstrates the importance of domestic crude integration and multiple-product processing; Livorno represents a more comprehensive industrial transformation; Venice and Gela provide established renewable-fuel experience; and Sarroch offers substantial conventional refining scale and complexity within a privately controlled international trading structure. Milazzo and Priolo add further diversity to the national industrial geography, but their individual future trajectories require careful separation of corporate ownership, planned projects and operating assets.

A coherent Italian strategy would therefore evaluate installations according to their contribution to national and European product balances, operational flexibility, access to multiple transport routes, technological adaptability and credible long-term investment conditions. The highest strategic value would attach to capabilities that are difficult to replace and that provide demonstrable resilience under plausible supply disruptions. Conversely, the existence of an industrial installation should not, by itself, justify public support where equivalent security benefits can be obtained more efficiently through alternative production, storage or distribution arrangements. This distinction is essential if industrial security is to become a credible investment criterion rather than a general argument for protecting every existing asset.

Chapter 6 — Key judgments

Italy’s refining system is strategically differentiated rather than uniform. Sannazzaro and Taranto retain important conventional processing and logistical capabilities, Sarroch provides exceptional industrial scale within the Mediterranean market, and the development of Livorno, Venice, Gela and Priolo demonstrates significant investment in renewable-fuel transformation. The partial-conversion model at Sannazzaro is particularly relevant because Eni intends to preserve conventional production while creating additional renewable-fuel capacity. However, neither announced projects nor nominal refining capacity establish long-term fuel security independently of operating performance, feedstock resilience and distribution capability. Asset-specific closure probabilities remain unsubstantiated without detailed financial and operational evidence.

Chapter 7 — France, Germany and the United Kingdom: Different National Models of Fuel Security

Strategic judgment: European refining security cannot be governed through a uniform industrial formula because France, Germany and the United Kingdom combine different production systems, demand structures, infrastructure arrangements and regulatory responsibilities

The European refining debate becomes considerably more complex when examined through national industrial systems rather than aggregate European statistics. France, Germany and the United Kingdom confront many of the same underlying pressures—declining long-term demand for certain conventional fuels, substantial refinery capital requirements, competition from newer international installations, energy costs and the need to decarbonise transport—but their industrial and institutional circumstances differ sufficiently that identical policy measures would produce different results. France’s refining system is connected to an established nuclear-powered electricity economy, substantial transport-fuel demand and important multinational petroleum-distribution infrastructure. Germany combines the largest petroleum-product production volume within the European Union with major industrial and logistics requirements, while also possessing significant central European transport connections. The United Kingdom operates outside the EU’s refining and environmental regulatory framework and has experienced refinery closures that its own government has explicitly associated with difficult operating economics and changing domestic demand. These differences make it necessary to distinguish European coordination from national implementation, since the security value of refining depends partly on geography, product requirements and the regulatory environment in which individual companies operate.

The comparison also demonstrates why a common European refining policy should not assume that every member state requires the same degree of domestic production capacity. A country with extensive port infrastructure, diversified product imports and accessible neighbouring refineries may be capable of meeting its supply-security objectives through a different combination of domestic capacity and trade than a country whose inland transport system depends heavily on particular pipeline or refinery connections. Conversely, domestic refining capacity may provide a valuable option during external disruption even where normal commercial markets supply imported fuels more cheaply. The appropriate balance must be established through a comparison of the total cost of maintaining secure supply, including production, storage, transport, emergency arrangements and the consequences of foreseeable disruptions. This framework is particularly relevant to NATO because military requirements cross national borders, whereas many investment and regulatory decisions remain within national jurisdictions.

France: refinery transformation within a wider system of industrial energy security

France’s refining strategy must be understood in relation to the structure of its domestic energy demand and the extensive industrial infrastructure supporting transport, petrochemicals and fuel distribution. Eurostat’s 2024 data identify France as one of the European Union’s largest petroleum-product consumers, with approximately 58.36 Mtoe of final consumption for energy and non-energy purposes. This scale makes the security of diesel and aviation-fuel availability significant to national economic continuity, even though the French electricity system relies heavily on nuclear generation. The presence of a comparatively low-carbon electricity supply does not eliminate the need for liquid transport fuels, since electricity generation and the provision of aviation or heavy-duty transport fuels are different industrial functions. French refining policy consequently involves the interaction of conventional production, imported petroleum products, renewable-fuel development and the distribution infrastructure needed to serve national and international markets. Oil and petroleum products — a statistical overview — Eurostat — August 2026.

France also occupies an important position within NATO’s Central Europe Pipeline System, which connects national infrastructure to a multinational network supplying military and civilian users. This gives France a logistical relevance extending beyond its own refining output because fuel received, stored or transported through French territory can contribute to wider Allied supply arrangements. The system’s commercial and military functions coexist, creating opportunities to utilise infrastructure during peacetime while maintaining military-priority arrangements. However, this integration also means that national security cannot be analysed exclusively through domestic production balances. Cross-border distribution depends on the operational condition of shared facilities, established procedures and the availability of suitable fuels elsewhere in the network. A French refinery investment may therefore possess broader European significance where its output can enter established multinational distribution systems, while the loss of capacity may have consequences extending beyond the immediate national market. Central Europe Pipeline System — NATO — official infrastructure assessment.

The industrial-policy challenge for France is to reconcile existing refining capabilities with the transformation of major energy and chemical sites. Conversion projects involving renewable fuels and industrial decarbonisation may preserve employment, infrastructure and technological capabilities, but they can also alter the quantity and variety of conventional petroleum products available domestically. The strategic assessment should therefore consider not only whether a former refinery remains an industrial site, but which processing operations continue, which product streams are manufactured and whether the new configuration strengthens or reduces supply resilience. This issue is especially relevant where investments shift industrial activity from crude processing towards specialised renewable hydrocarbons, chemicals or alternative-energy systems. Such transformations should be evaluated through their actual production characteristics and their relationship to national fuel demand rather than treated automatically as either successful industrial retention or a complete loss of refining capability.

France’s broader industrial policy also illustrates the importance of coordination between decarbonisation and industrial competitiveness. Refining facilities compete for capital within energy companies whose investment portfolios may include electricity generation, renewable energy, chemicals and other businesses. Where the expected return from conventional refining is insufficient to justify long-term maintenance or modernisation, companies may redirect investment to activities with stronger regulatory support or higher expected margins. National authorities can influence the decision through infrastructure policy, industrial financing and regulatory predictability, but the existence of strategic national demand does not itself guarantee profitable refinery operation. A durable policy must therefore identify the services that domestic refining provides which cannot be obtained through ordinary trade at an acceptable level of risk and determine whether public intervention would produce a measurable improvement in those services.

Germany: industrial scale, central-European logistics and the cost of preserving processing flexibility

Germany’s refining position differs because of the scale of its industrial economy, its central geographical location and the relationship between petroleum-product production and major European transport corridors. In 2024, Eurostat records German petroleum-product production of approximately 99.0 Mtoe, making it the largest producer within the European Union, while national final consumption of oil and petroleum products amounted to approximately 76.37 Mtoe. These figures describe different statistical categories and cannot be subtracted to calculate national export capacity without reconciling product definitions, intermediate consumption, refinery inputs and trade flows. Nevertheless, they establish the substantial industrial scale of Germany’s petroleum system and explain why refinery policy remains relevant to national competitiveness, freight transport and the functioning of European supply chains. Oil and petroleum products — a statistical overview — Eurostat — August 2026.

Germany’s central location gives refinery and distribution infrastructure an additional strategic dimension. The country forms an important part of the Central Europe Pipeline System and provides geographical connections between western European energy infrastructure and transport corridors leading towards other European markets. During normal commercial conditions, these connections facilitate product distribution and trade; during a military crisis, they could become important to reinforcement and sustainment requirements. The practical significance depends on the capacity and resilience of specific infrastructure rather than on national refining volume alone. A refinery located near major inland distribution networks may possess strategic value disproportionate to its contribution to aggregate European production if it can supply otherwise difficult-to-serve markets or provide alternatives during transport disruption.

German refinery economics are also influenced by the country’s wider industrial energy-cost environment. Refining is an energy-intensive manufacturing activity, and the cost of electricity, gas, hydrogen and emissions compliance can materially affect competitiveness relative to installations in other regions. The problem is not simply that European refineries face environmental obligations while international competitors do not; the actual competitive position depends on energy prices, refinery complexity, product markets, operating efficiency, carbon costs and the extent to which emissions-related expenditure can be recovered in product prices. Newer refineries outside Europe may benefit from scale or integration with upstream production, but European facilities may possess advantages in proximity to consumers, specialised product capability and established distribution systems. Germany’s policy challenge is therefore to identify the circumstances under which domestic production offers an economically justified security benefit and whether industrial regulation creates sufficient visibility for the necessary maintenance and conversion investments.

The transition towards renewable fuels adds a further dimension because Germany’s industrial economy possesses substantial technological capabilities relevant to hydrogen, engineering and chemical processing. These competencies may support the development of synthetic-fuel and biorefining projects, but competitive production will depend on the delivered cost of suitable electricity, hydrogen and feedstocks. It should not be assumed that industrial expertise automatically ensures that all future renewable fuels will be manufactured domestically. Where imported renewable hydrocarbons can be produced more cheaply abroad, Germany may face a strategic choice between supporting domestic manufacturing, securing diversified international supply or adopting a combination of both. The appropriate decision would depend on whether the additional cost of domestic capacity is justified by measurable benefits in supply reliability, technological capability and industrial employment.

United Kingdom: refinery closures and the explicit reassessment of downstream industrial security

The United Kingdom provides one of the clearest documented cases of a national government reassessing the importance of domestic refining after significant industrial contraction. Its 2025 Statutory Security of Supply Report, published by the Department for Energy Security and Net Zero, records total petroleum-product production of 50.8 million physical tonnes in 2024, alongside domestic crude oil and natural gas liquids production of 30.4 million tonnes. UK oil-product demand increased by 2.0% compared with 2023, while jet-fuel demand increased by 7.9%, reflecting the recovery of international aviation activity. These figures cannot be compared directly with Eurostat’s national production series expressed in Mtoe without conversion and reconciliation, but they provide a reliable domestic baseline for assessing the British downstream system. Statutory Security of Supply Report: 2025 — UK Department for Energy Security and Net Zero — December 2025.

The same government report documents two important industrial developments. The Grangemouth refinery in Scotland ceased conventional refining operations and was converted into an import terminal in spring 2025, while the Prax Lindsey refinery in North Lincolnshire entered insolvency proceedings and ceased refining operations. The government assessed that national fuel security could continue to be maintained through remaining domestic capacity and international trade, but it also acknowledged the need to monitor the implications of changing infrastructure and market conditions. The subsequent completion of the sale of the Lindsey refinery to Phillips 66 in April 2026 should not be interpreted as evidence that conventional refining operations had automatically resumed; ownership and industrial operating status are separate matters. Statutory Security of Supply Report: 2025 — UK Department for Energy Security and Net Zero — December 2025 DESNZ Annual Report and Accounts 2025–2026 — UK Department for Energy Security and Net Zero — 2026.

The British government’s February 2026 call for evidence on the future of the downstream oil sector is particularly relevant because it explicitly recognises the long-term importance of refining to national security, economic resilience and industrial activity. The consultation identifies declining domestic demand, international competition, ageing infrastructure, high energy costs and emissions-related expenditure among the pressures affecting British refineries. It also acknowledges that refinery closures can increase dependence on international fuel markets. This represents an important parallel with the European Commission’s October initiative: both institutions are examining whether the commercial conditions facing refining adequately reflect the value of maintaining domestic production capabilities. The two exercises are not identical, however, because the United Kingdom operates under its own industrial, environmental and security-of-supply arrangements rather than EU legislation. Future of the UK downstream oil sector: call for evidence — UK Department for Energy Security and Net Zero — February 2026.

The conversion of Grangemouth into an import terminal illustrates the trade-off particularly clearly. Import infrastructure can maintain commercial supply and may reduce the need to finance ageing processing equipment, but it does not reproduce the ability to transform crude oil into finished fuels. A refinery closure therefore changes the nature of national dependence even where the immediate consumer market remains adequately supplied. The strategic question is not whether the closure necessarily causes a shortage, but whether the new configuration can deliver an acceptable level of resilience under disruptions affecting imported finished products. The answer depends on storage, terminal capacity, supplier diversification, maritime access and alternative domestic production. Britain’s statutory stockholding and national monitoring arrangements provide additional resilience, but the assessment must still distinguish emergency inventories from the long-term industrial capability required to replenish them.

Comparative industrial and institutional assessment

Dimension	France	Germany	United Kingdom
Regulatory framework	EU refining, climate and fuel legislation	EU refining, climate and fuel legislation	Independent UK industrial and environmental framework
Verified petroleum-market scale	58.36 Mtoe final consumption, 2024	99.0 Mtoe product output and 76.37 Mtoe final consumption, 2024	50.8 million physical tonnes product output, 2024
Principal industrial characteristic	Refining, major transport demand and integration with multinational infrastructure	Largest EU petroleum-product production base; central European industrial economy	Reduced refinery base following major closures
NATO logistics relevance	Central Europe Pipeline System participation	Central Europe Pipeline System participation and central transport geography	NATO participation under separate national infrastructure arrangements
Key transformation issue	Retaining fuel supply while converting industrial facilities	Balancing processing capacity, energy costs and technology investment	Managing domestic capacity decline and increased reliance on product imports
Documented policy position	EU regulatory framework and national implementation	EU regulatory framework and national implementation	February 2026 national downstream-sector policy consultation
Principal strategic uncertainty	Balance between converted capacity, domestic fuels and cross-border supply	Competitiveness and continued investment in industrial processing	Long-term resilience following refinery closures
Relevant public authority	French government and EU institutions	German federal authorities and EU institutions	UK Department for Energy Security and Net Zero and other national authorities

The national figures are intentionally presented with their respective statistical units and definitions. The British production figure is reported in physical tonnes, whereas the cited Eurostat measures are expressed in tonnes of oil equivalent.

EU–NATO coordination and the limits of national industrial strategies

The comparison reveals a structural coordination problem. National governments and companies make decisions about refinery investment, plant closure, energy regulation and product supply, while military logistics and collective-defence planning involve requirements that may extend across several jurisdictions. A refinery may therefore be commercially important to one national market but strategically relevant to another country’s military supply arrangements. Conversely, a nationally important installation may contribute little to multinational resilience if its output cannot be transferred efficiently through available infrastructure. The security value of refining is consequently partly collective, while many costs remain concentrated on individual operators and national governments.

This divergence creates a potential investment problem. A government may be reluctant to finance an installation whose benefits extend to neighbouring states, while a private operator may be unwilling to maintain capacity that is valuable mainly under exceptional military conditions. An effective European framework would need to establish how security-related benefits are identified and whether relevant costs should be shared through national procurement, multinational infrastructure programmes or other legally permissible mechanisms. Such an approach would also require distinguishing ordinary market support from compensation for specific, verifiable security services.

Chapter 7 — Key judgments

France, Germany and the United Kingdom demonstrate that refining security is influenced by national industrial geography, production economics and regulatory institutions as much as by aggregate European demand. France’s integration with multinational fuel infrastructure, Germany’s industrial scale and central logistical position, and the United Kingdom’s experience of refinery closures each reveal different dimensions of the same underlying problem: markets may continue to supply finished fuels while the domestic industrial capacity available during a severe disruption declines. A coordinated European response must therefore preserve national flexibility while establishing comparable measures of strategically important production and distribution capabilities. The principal policy requirement is not identical refinery protection across countries, but a defensible framework connecting commercial investment with nationally and collectively relevant fuel-security obligations.

Chapter 8 — Refining, Nuclear Energy, Semiconductors and Steel: The Cost of Strategic Reassessment

Strategic judgment: Europe’s refining debate is part of a broader reconsideration of industrial-policy assumptions, but the evidence does not support treating nuclear energy, semiconductors, steel and refining as identical cases of deliberate industrial abandonment

The European refining initiative belongs to a wider pattern in which industrial capabilities once evaluated principally through market competitiveness, environmental objectives or expectations of technological substitution are increasingly being assessed according to their contribution to economic security, technological sovereignty and geopolitical resilience. Nuclear energy, semiconductor manufacturing and steel production provide important comparisons because each requires substantial fixed investment, specialised personnel, complex supply chains and long planning horizons. Their strategic significance can persist even where immediate commercial returns are uncertain or where policymakers expect substantial technological change. Nevertheless, the historical development of these sectors differs, and a rigorous comparison must avoid the simplified argument that European authorities uniformly declared them obsolete before reversing course. European nuclear policy has remained divided among member states, semiconductor manufacturing has faced global competitive pressures rather than an EU-wide policy of abandonment, and steel production has continued to operate as an essential industrial activity despite sustained cost and trade pressures. The common issue is not identical historical causation, but the risk that industrial capabilities become difficult to restore after a prolonged period of insufficient investment, weak profitability or adverse regulatory expectations.

The central analytical lesson is that productive capacity possesses characteristics not fully reflected in annual market output. A functioning industrial installation embodies accumulated capital, infrastructure connections, production knowledge, supply-chain relationships and regulatory approvals. Once an installation closes, its equipment may be dismantled, employees may leave the sector, maintenance and specialist suppliers may disappear, and land or infrastructure may be allocated to alternative uses. Restoring the capability can consequently require much more than repeating the original capital expenditure. The time necessary to permit, finance, construct and commission new facilities becomes strategically important where external dependence is discovered during a geopolitical crisis. Conversely, preserving every historical installation regardless of future demand would impose substantial costs and could divert investment from more competitive or technologically advanced capabilities. The policy objective should therefore be to identify which industrial options are sufficiently important and difficult to replace that their retention warrants deliberate intervention.

Nuclear energy: from divergent national policies to renewed recognition of long-term system value

Nuclear energy illustrates the difficulty of treating European industrial policy as a single national trajectory. Some EU member states maintained or expanded nuclear programmes, while others pursued phase-outs or restricted new construction. The resulting differences reflect national political decisions, electricity-market structures, financing arrangements, public acceptance and safety-policy choices rather than a uniform EU decision to abandon the technology. The more recent change in European institutional treatment consists of increased attention to nuclear energy’s potential contribution to decarbonisation, electricity-system stability, industrial competitiveness and security of supply. This recognition is particularly relevant to the refining comparison because nuclear generation, like refining, involves capital-intensive infrastructure whose operating life and investment recovery extend across several political cycles.

In its eighth Nuclear Illustrative Programme, published in 2025 and subsequently incorporated into the Commission’s 2026 nuclear-policy work, the Commission estimated that approximately €241 billion of investment would be required by 2050 to implement member-state plans involving lifetime extensions of existing reactors and construction of new large-scale nuclear capacity. The Commission also identified additional investment requirements for small modular reactors and other advanced technologies. Its projections indicate an increase in EU nuclear installed capacity from approximately 98 GWe in 2025 to around 109 GWe by 2050, subject to the implementation of national plans. These figures are projections and investment requirements, not completed expenditure or commissioned generating capacity. They demonstrate the financial scale of maintaining and developing a strategic industrial capability over several decades, while also showing that the industrial consequences of earlier national decisions cannot be reversed through political declarations alone. Nuclear investment needs — European Commission — official policy assessment Commission unveils strategy to bring Europe’s first SMRs online by the early 2030s — European Commission — March 2026.

The comparison with refining is especially useful because both sectors face long-lived investment decisions under changing political and regulatory expectations. Nuclear projects require confidence in electricity-market arrangements, licensing, financing and long-term operational policy; refinery projects require confidence in transport-fuel demand, environmental regulation, product markets and the economic treatment of strategic production capabilities. Both sectors also involve industrial expertise that cannot be recreated immediately after a period of contraction. Yet an important difference remains: nuclear power contributes primarily to the electricity system, while refining produces liquid fuels whose end uses and technological substitutes are different. A policy instrument appropriate for ensuring low-carbon electricity generation cannot therefore be transferred mechanically to refinery capacity without considering its effects on fossil-fuel demand, emissions and alternative-fuel investment.

Semiconductors: strategic autonomy and the economics of manufacturing concentration

The semiconductor sector presents a different form of industrial-security problem because advanced electronic components are indispensable to defence equipment, telecommunications, industrial automation, transport systems and digital infrastructure. European semiconductor companies retain significant capabilities in specialised technologies, automotive electronics, industrial applications, power semiconductors and manufacturing equipment, but the global distribution of fabrication capacity creates strategic dependencies that cannot be eliminated simply through design expertise or participation in international markets. The European Chips Act represents an institutional response to this problem, combining support for research, manufacturing investment and supply-chain resilience. The Commission describes the initiative as involving more than €43 billion of expected public investment, while its broader policy-driven investment framework envisages more than €100 billion of public and private investment through 2030. These are programme and investment expectations, not evidence that the full sums have already been spent or that the intended industrial capacities have all entered production. Chips Act — European Commission — official programme assessment.

The semiconductor comparison reveals the limits of industrial sovereignty as a purely national or regional objective. Modern semiconductor manufacturing depends on highly specialised equipment, materials, intellectual property, software and production processes distributed across multiple jurisdictions. Establishing additional European fabrication capacity can reduce selected dependencies, but it does not create complete autonomy unless the supporting supply chain is also secure. Refining presents a comparable problem in a different technological form: domestic processing reduces dependence on imported finished fuels while retaining exposure to imported crude, hydrogen-related inputs, equipment, catalysts and international transport. In both sectors, the strategic value of domestic manufacturing depends on whether it can operate during disruption and whether the supporting infrastructure remains available.

There are nevertheless important differences in the economics of industrial intervention. Semiconductor manufacturing is characterised by rapid technological development in some product categories and very high capital expenditure for leading-edge fabrication, while refining technology changes more gradually and the demand outlook for conventional petroleum products is influenced by decarbonisation policy. Semiconductor investment may be justified partly by expectations of technological growth, whereas conventional refinery retention may involve maintaining capacity in a market expected to contract over time. The public-policy justification must therefore be formulated differently. In semiconductors, governments may seek to develop new production capabilities in strategically important technologies; in refining, the immediate challenge may be to preserve selected existing capabilities while enabling their eventual transformation. Both require industrial-policy discipline, but they do not necessarily require identical financing mechanisms or investment horizons.

Steel: industrial competitiveness, defence production and the consequences of cumulative capacity loss

Steel provides a particularly relevant comparison because it is a foundational industrial input for construction, infrastructure, transport equipment, machinery and defence manufacturing. European steel producers face a combination of international competition, energy costs, environmental obligations and the capital requirements of decarbonisation. Unlike refining, the sector’s strategic significance has not generally been questioned in terms of whether steel itself will remain necessary; rather, the policy problem concerns the competitiveness and location of production, the transition to lower-emission processes and the ability to maintain manufacturing capacity within Europe. The European Commission’s Steel and Metals Action Plan, published on 19 March 2025, explicitly addresses the sector’s importance to economic security and industrial resilience, demonstrating the institutional recognition that certain manufacturing capabilities may require coordinated measures beyond conventional market adjustment. A European Steel and Metals Action Plan — European Commission, COM(2025) 125 final — March 2025.

The central comparison concerns the interaction between energy costs, industrial transformation and international competition. Steel production, refining and petrochemicals all involve substantial energy and capital requirements, making their competitiveness sensitive to differences in electricity, gas, carbon and financing costs. Where European regulatory obligations increase investment requirements without corresponding improvements in productivity, market conditions or demand for low-emission products, companies may face incentives to relocate production or reduce capacity. However, the economic effects cannot be attributed automatically to environmental regulation alone, because international overcapacity, changes in demand, equipment age, production efficiency and trade conditions can also determine industrial outcomes. A credible assessment must distinguish the contribution of each factor rather than assume that every closure or loss of market share reflects a single policy cause.

The steel comparison also illustrates the importance of industrial capability beyond the immediate output of a particular installation. Steelmaking supports downstream sectors through specialised grades, supply reliability, technical cooperation and manufacturing expertise. A reduction in domestic production may increase import dependence while weakening relationships between producers and industrial customers. Refining possesses similar characteristics through the supply of specialised fuels, lubricants, petrochemical feedstocks and processing services, but its products and logistics differ. In both sectors, however, the closure of a major industrial facility may affect suppliers, technical personnel and regional infrastructure in ways not captured by the direct loss of production capacity.

Comparative assessment of Europe’s strategic industrial reassessment

Sector	Documented strategic concern	Principal economic constraint	Relevant institutional response	Quantified official reference	Important limitation
Refining	Dependence on domestic liquid-fuel production and crisis supply	Demand uncertainty, operating costs and international competition	Commission High-Level Dialogue, October 2026	Approximately 25% fewer refineries and 10% lower aggregate capacity over roughly two decades, as reported by Commissioner Jørgensen	Does not establish the causes or replacement cost of lost capacity
Nuclear energy	Electricity security, decarbonisation and long-term industrial capability	Capital expenditure, financing and regulatory timelines	Nuclear Illustrative Programme and 2026 SMR strategy	Approximately €241 billion of investment needs to 2050	Investment requirement, not historical loss or completed spending
Semiconductors	Technological dependence and manufacturing concentration	Extremely high capital expenditure and international supply-chain specialisation	European Chips Act	More than €43 billion expected public investment; more than €100 billion broader policy-driven investment	Programme objectives, not verified production gains
Steel	Industrial competitiveness, strategic manufacturing and decarbonisation	Energy costs, global competition and transformation investment	Steel and Metals Action Plan, March 2025	No comparable cumulative loss-cost estimate established in the cited record	Industrial restructuring has multiple causes

The figures in this comparison are not interchangeable measures of economic loss. Refinery closures represent historical industrial change, nuclear figures concern future investment requirements, semiconductor figures describe expected policy-driven investment and steel policy addresses competitiveness and transformation. Combining them into a single estimate of Europe’s industrial-policy costs would be methodologically invalid.

The economics of industrial capability loss

The cumulative economic cost of losing strategic industrial capacity can be examined through several categories, although the public evidence reviewed here does not support a single defensible monetary estimate spanning refining, nuclear energy, semiconductors and steel. The first category is the loss of physical production capability, including specialised processing equipment, industrial utilities and infrastructure connections. The second is the loss of technical competence, encompassing experienced personnel, maintenance expertise, industrial engineering and relationships with specialised suppliers. The third is the potential deterioration of market position as customers establish alternative supply relationships and competing producers expand their share of international markets. The fourth concerns the cost of future reconstruction, which may involve new permitting, environmental compliance, construction, equipment procurement and workforce development. The fifth is the economic cost of dependence during disruption, including higher procurement expenditure, production interruptions and the consequences of unavailable materials or fuels.

These categories must be treated as distinct rather than automatically added together because some may overlap. For example, the cost of rebuilding an installation may already incorporate certain equipment and workforce expenses, while lost market share can affect future profitability without necessarily representing an additional direct public expenditure. A complete historical cost assessment would require a counterfactual identifying what industrial capacity would have existed under an alternative policy or market trajectory and comparing that outcome with the observed record. Such an exercise would need to account for changing demand, technological improvements, corporate investment decisions and international competition. Without those assumptions, claims that Europe has incurred a particular number of billions of euros in losses through industrial abandonment would be unsupported.

The refining sector provides an especially important example of the counterfactual problem. The closure of approximately one-quarter of EU refineries over roughly twenty years does not establish that preserving all those installations would have been economically efficient or strategically necessary. Some closures may have reflected persistent overcapacity, weak margins or the existence of more competitive production elsewhere. Others may have reduced valuable industrial flexibility or increased dependence on imported products. Distinguishing between these outcomes requires a facility-level assessment of historical operating performance, product output, location, investment needs and the security value of the capacity that disappeared. The mere fact of closure is insufficient to prove policy failure; equally, the continued availability of imported fuels does not prove that the loss of domestic capacity has been strategically costless.

Industrial memory, supply-chain depth and the time required to restore lost capabilities

A further common characteristic across the four sectors is the importance of accumulated industrial knowledge. Large production systems operate through combinations of formal engineering expertise, specialised equipment and practical experience developed over many years. Refineries require personnel familiar with complex process interactions, high-pressure equipment, hazardous materials, maintenance planning and fuel-quality requirements. Nuclear installations depend on licensed engineering and operational competencies, while semiconductor plants require highly specialised process-control and manufacturing expertise. Steel production similarly relies on metallurgical knowledge, process optimisation and the ability to manufacture products meeting demanding customer specifications.

The disappearance of these capabilities can create a delay between political recognition of strategic importance and the actual restoration of production. Capital can sometimes be allocated relatively quickly, but industrial construction, licensing, equipment procurement and workforce development proceed over longer periods. The effect is especially significant in sectors whose facilities require extensive environmental approvals, specialised components or complex commissioning. European policymakers should therefore distinguish preserving an existing operational capability from creating a replacement. These are different investment decisions, with different risks, implementation horizons and possible outcomes.

This distinction is directly relevant to the Commission’s refining dialogue. If strategically necessary processing capacity is allowed to close while renewable substitutes remain commercially or technically immature, future policy intervention may face higher costs and longer implementation periods than would have been required to retain or adapt the existing installation. Conversely, financing obsolete capacity without a credible future demand or security function can delay necessary industrial transformation. The appropriate policy response is to identify critical capabilities before their disappearance becomes irreversible, rather than assume that all existing installations should be preserved or that international markets will always provide inexpensive substitutes.

The implications for European industrial governance

The comparison between refining, nuclear energy, semiconductors and steel suggests that European industrial policy requires a more explicit treatment of strategic option value. Governments and European institutions already evaluate industrial projects through economic, environmental and competition-policy considerations, but strategic security introduces an additional dimension: the cost of losing a capability that may be difficult to recreate during a crisis. This does not justify abandoning market discipline or weakening environmental objectives. It requires a more systematic assessment of which industrial functions must remain available and which risks can be managed through trade, storage, diversification or alternative technologies.

A credible approach would also distinguish industrial-policy objectives from the instruments selected to achieve them. Research funding may help develop new technologies but cannot directly preserve an existing refinery’s output. Public procurement may support the availability of specified products but does not necessarily finance the upstream equipment required to manufacture them. Infrastructure investment can strengthen distribution resilience while leaving commercial production capacity exposed to closure. State-aid measures may improve the economics of selected projects but require a demonstrable public purpose and proportionality. The choice of instrument must therefore follow from the capability being protected rather than from the general political importance of the sector.

For refining, this means that the Commission’s future roadmap should establish a clear relationship between fuel-security requirements, expected demand transformation and the industrial investments necessary to maintain adequate production and distribution capabilities. The European experience in nuclear energy demonstrates the importance of long-term investment visibility; semiconductors illustrate the difficulty of building industrial capacity within globally distributed supply chains; and steel demonstrates how energy costs and international competition can undermine production even where the strategic value of the final product is widely recognised. Together, these precedents strengthen the case for a durable refining framework that avoids repeated changes in investment expectations while remaining compatible with the Union’s long-term energy and climate objectives.

Chapter 8 — Key judgments

The comparison with nuclear energy, semiconductors and steel supports the conclusion that strategically important industrial capabilities cannot be evaluated exclusively through short-term commercial profitability, but it does not establish that all historical industrial contraction resulted from deliberate European policy choices. The four sectors differ in technological development, market structure and regulatory history, yet share common vulnerabilities associated with high capital requirements, long investment horizons, specialised labour and globally distributed supply chains. The most important lesson for refining is that industrial capabilities may become difficult and expensive to restore once physical assets, technical knowledge and supporting infrastructure have disappeared. The Commission’s October 2026 initiative provides an opportunity to incorporate this consideration into a more coherent policy framework, but the evidence does not yet establish that such a framework has been adopted or financed.

Pillar II — Consolidated Strategic Assessment

The industrial analysis demonstrates that Europe’s refining challenge cannot be resolved through a simple choice between preserving conventional refineries and accelerating renewable-fuel conversion. The productive capabilities required for energy and defence security are embedded in technically differentiated installations whose economic viability depends on feedstock compatibility, processing complexity, hydrogen availability, maintenance expenditure, product specifications and access to transport infrastructure. The Commission’s desire to increase middle-distillate output in the short term must therefore be reconciled with the practical limitations of existing equipment and the capital requirements of substantial processing upgrades. Although operational optimisation may provide incremental production gains, the preservation of strategically necessary capacity requires investment decisions extending well beyond the immediate commodity-price cycle.

The transition towards HVO, HEFA sustainable aviation fuels and synthetic hydrocarbons creates important opportunities for adapting this industrial system, particularly where existing sites can retain technical competencies and logistics infrastructure. However, renewable-fuel investments introduce new dependencies on eligible feedstocks, hydrogen and electricity, while complete conversion may eliminate conventional production capabilities whose strategic value remains significant. Eni’s Italian programme offers several differentiated examples: Sannazzaro combines planned renewable capacity with the retention of conventional processing; Livorno illustrates a more comprehensive transformation; Venice and Gela provide established biorefining experience; and Taranto and Sarroch continue to demonstrate the importance of conventional refining configuration and market access. These installations cannot be assessed through a single capacity metric, nor can project announcements be treated as evidence of completed production.

The national comparison reinforces the importance of industrial geography and institutional differences. France’s multinational logistics integration, Germany’s refining scale and industrial demand, and the United Kingdom’s experience of refinery closures demonstrate that supply security can be maintained through different combinations of domestic production, infrastructure and international trade, but that these combinations create distinct forms of exposure during disruption. The historical comparison with nuclear energy, semiconductors and steel adds a further consideration: the industrial capabilities most difficult to reconstruct are often those whose loss becomes strategically apparent only after investment, personnel and supporting supply chains have already moved elsewhere.

The principal consequence for European decision-makers is that refining policy must become capability-based rather than capacity-based. The relevant question is not how many refineries Europe should preserve in the abstract, but which combinations of conventional production, renewable-fuel manufacturing, technological expertise and logistics infrastructure are necessary to guarantee an acceptable level of resilience at a sustainable economic cost. Establishing that framework requires transparent technical criteria, coherent investment conditions and a distinction between commercial industrial transformation and the provision of specific security-related capabilities.

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Pillar III — Strategic Autonomy, Regulatory Credibility and the 2031 Outlook

Chapter 9 — Regulatory Architecture and the 15–20-Year Investment Horizon

Strategic judgment: the European refining industry’s principal regulatory problem is not the absence of legislation, but the absence of an integrated framework linking decarbonisation obligations, investment recovery, industrial competitiveness and the public value of secure fuel production

The European Commission’s decision of 28 October 2026 to initiate a structured dialogue with the refining industry creates a fundamental test of European regulatory credibility. The Union already possesses extensive legislation governing industrial emissions, carbon pricing, renewable energy, sustainable aviation fuels, maritime-fuel emissions and competition policy, together with financial mechanisms intended to accelerate industrial decarbonisation. What remains insufficiently defined is the relationship between those instruments and the maintenance of industrial capacity considered necessary for European civilian and military security. This distinction is consequential because refinery investment decisions are made across economic horizons much longer than the duration of a political crisis, while regulatory obligations impose costs and create investment signals that may change at different speeds. An operator considering the modernisation of a hydroprocessing unit, the replacement of an ageing hydrogen-production installation or the conversion of an existing refinery into renewable-fuel manufacturing must evaluate not only the technical feasibility of the investment but also future fuel demand, carbon costs, operating margins, financing conditions, regulatory compliance and the probability that the asset will remain commercially useful throughout its intended operating life. The political recognition of refining’s strategic value does not resolve these variables unless it is accompanied by specific arrangements capable of influencing capital allocation.

The Commission’s published account of the dialogue establishes the distinction between policy recognition and implementation. Commissioners Dan Jørgensen and Andrius Kubilius presented refining as relevant to energy security, defence readiness and industrial competitiveness, while participants discussed short-term production optimisation and a medium-term transformation roadmap. The Commission did not announce a comprehensive refinery-support fund, a legally binding minimum refining-capacity requirement or a uniform exemption from existing environmental legislation. In parallel, FuelsEurope welcomed the initiative as an opening towards a European refining strategy, emphasising the need for resilient and competitive domestic production and for a roadmap capable of supporting industrial transformation. The two positions are compatible in their recognition of the problem, but they should not be treated as identical commitments: the Commission has initiated an institutional process, whereas the industry is seeking conditions under which long-term commercial investment becomes more predictable. The negotiation concerns the practical distribution of risks, obligations and costs between operators, consumers and public authorities. Commission launches High-Level Dialogue with the European refining sector — European Commission — October 2026 Strategic Dialogue opens path towards an EU Refining Strategy — FuelsEurope — October 2026.

Carbon pricing and the distinction between refinery emissions and downstream fuel consumption

The European Union Emissions Trading System is one of the most important regulatory determinants of the operating environment for conventional refineries. Its original industrial emissions framework has been substantially revised through the Fit for 55 legislative package, with the 2023 reforms tightening the cap for covered sectors to achieve a 62% reduction in emissions by 2030 compared with 2005. The Commission identifies annual linear reduction factors of 4.3% during 2024–2027 and 4.4% from 2028, together with reductions in the emissions cap through rebasing adjustments. These measures establish an increasingly constrained supply of emissions allowances over time, although the actual carbon-price trajectory cannot be inferred directly from the cap reduction because prices also depend on demand for allowances, energy-market conditions, economic activity, expectations and the operation of the Market Stability Reserve. About the EU Emissions Trading System — European Commission — official legislative overview EU ETS emissions cap — European Commission — official regulatory explanation.

For refining companies, the economic effect of emissions trading depends on the emissions generated by refinery operations, the allocation of free allowances, the carbon intensity of the installation and the ability to incorporate compliance costs into product prices. Direct refinery emissions arise from activities such as process heating, hydrogen production, utilities and other industrial operations. These should be distinguished from emissions resulting from the subsequent combustion of refined fuels by vehicles, aircraft and other end users. Combining the two categories without a clearly defined accounting boundary would produce misleading comparisons between conventional refining, biorefining and synthetic-fuel production. The distinction is also important for policy design because measures intended to reduce industrial emissions at a refinery do not necessarily reduce downstream fuel consumption, while measures encouraging lower-carbon fuels may alter the commercial value of existing processing equipment without immediately changing the demand for liquid hydrocarbons.

The EU ETS framework provides free allocation to eligible industrial activities under defined conditions, while the revised system progressively strengthens incentives for decarbonisation. The existence of free allocation means that the gross quantity of emissions produced by a refinery should not automatically be multiplied by the market price of allowances and presented as its actual cash compliance cost. A defensible calculation must account for the number of allowances allocated free of charge, benchmark performance, purchased allowances, relevant emissions boundaries and any applicable adjustments. The 2026 regulatory position also requires temporal discipline because the Commission presented a targeted proposal on 17 July 2026 to revise aspects of the ETS in support of industrial competitiveness and the Union’s 2040 climate objectives. A proposal is not equivalent to enacted legislation, and refinery investment models should therefore distinguish the rules legally in force from changes that remain subject to the legislative process. About free allocation — European Commission — official regulatory overview.

The regulatory interaction between conventional refining, aviation fuels and maritime transport

European renewable-fuel regulation introduces a second and partly different investment signal. Under Regulation (EU) 2023/2405, ReFuelEU Aviation establishes minimum sustainable aviation-fuel shares of 2% from 2025 and 6% from 2030, with additional requirements for synthetic aviation fuels. Over the 2030–2031 period, the regulation specifies an average synthetic aviation-fuel share of 1.2%, subject to an annual minimum of 0.7%. These requirements apply to the supply of aviation fuels at relevant Union airports under the regulatory conditions established by the legislation. They are not a guarantee that the fuel will be manufactured in Europe, nor do they automatically provide an incentive for the preservation of conventional refinery capacity. Regulation (EU) 2023/2405, Articles 4 and 18 and Annex I — European Parliament and Council — October 2023.

FuelEU Maritime operates through a different regulatory mechanism, establishing progressively tighter limits on the greenhouse-gas intensity of energy used on board covered ships. The Commission identifies required reductions of 2% from 2025, 6% from 2030, 14.5% from 2035, 31% from 2040, 62% from 2045 and 80% from 2050, relative to the regulatory reference value. These are reductions in the greenhouse-gas intensity of energy used by covered ships, not direct requirements that a corresponding percentage of all marine fuel must be biofuel. The distinction matters because maritime compliance may involve different combinations of fuels, technologies and operational measures, each with implications for refinery investment and the future composition of marine-fuel demand. Decarbonising maritime transport — FuelEU Maritime — European Commission — official regulatory overview.

The interaction of these policies generates an industrial challenge. Refiners face obligations and commercial incentives to invest in lower-emission operations and alternative fuels while continuing to manufacture conventional products that remain necessary for significant parts of civilian transport and defence. Investments in renewable-fuel production may benefit from a legally mandated market, but they also require feedstocks, hydrogen, technology and financing. Conventional refinery upgrades can maintain product quality and operational resilience, yet their commercial returns remain exposed to uncertainty about future fossil-fuel demand. Consequently, regulatory predictability must concern not only the environmental obligations themselves but also the expected relationship between conventional and renewable production during the transition.

Instrument	Legal or policy status at 29 October 2026	Quantified provision or time horizon	Principal industrial consequence	Limitation for strategic refining
EU ETS Directive and 2023 revisions	Enacted framework	62% emissions reduction for covered ETS sectors by 2030 versus 2005	Carbon-related operating and investment incentives	Does not establish strategic refinery-capacity requirements
EU ETS linear reduction factor	Enacted framework	4.3% annually in 2024–2027; 4.4% from 2028	Tightening emissions allowance supply	Not a forecast of allowance prices
ReFuelEU Aviation	Enacted regulation	SAF minimum 6% from 2030; synthetic-fuel sub-mandate	Creates demand for eligible aviation fuels	Does not guarantee EU-based manufacturing
FuelEU Maritime	Enacted regulation	6% reduction in covered onboard energy GHG intensity from 2030	Encourages lower-emission maritime energy	Not a direct refinery-production obligation
Clean Industrial Deal State Aid Framework	Commission state-aid framework	Applies from June 2025 to December 2030	Facilitates specified clean-energy and industrial-decarbonisation support	Does not authorise indiscriminate subsidies for conventional refining
July 2026 ETS revision initiative	Commission proposal	Legislative outcome not established at cut-off	Potential future changes to industrial carbon-market conditions	Proposed provisions must not be treated as enacted
October 2026 refining dialogue	Institutional initiative	Roadmap and technical follow-up announced	Opens coordination on production and industrial transformation	No verified binding capacity-retention mechanism announced
Industry investment-visibility objective	Industry policy position	15–20 years	Seeks improved certainty for long-lived investments	Not a legally guaranteed investment horizon

Sources: EU ETS — European Commission, ReFuelEU Aviation Regulation — European Parliament and Council, FuelEU Maritime — European Commission, Clean Industrial Deal State Aid Framework — European Commission — June 2025 and FuelsEurope’s response to the refining dialogue — October 2026.

State aid, industrial financing and the conditions for legitimate public intervention

The Clean Industrial Deal State Aid Framework, adopted on 25 June 2025 and applicable until 31 December 2030, provides a relevant regulatory context for investments in industrial decarbonisation and clean technologies. The framework facilitates specified categories of support involving clean-energy deployment, electricity costs for energy-intensive users, industrial decarbonisation, clean-technology manufacturing and the reduction of private investment risk. Its significance for the refining sector lies principally in the possibility of supporting eligible transformation activities under defined conditions. However, the framework cannot be interpreted as a general authorisation for member states to subsidise all conventional refining operations or to guarantee the profitability of selected plants merely because they are considered strategically important. Any proposed support must be assessed against the applicable legal basis, eligibility requirements, proportionality rules and the wider framework governing competition within the internal market. Clean Industrial Deal State Aid Framework — European Commission — June 2025.

This legal differentiation creates at least three distinct financing problems. The first concerns decarbonisation investments that reduce industrial emissions or manufacture lower-carbon fuels and may qualify under relevant financial or state-aid instruments. The second concerns commercially justified investments in refinery efficiency, maintenance or conversion flexibility that companies would ordinarily finance from internal resources, debt or equity. The third concerns capacities that governments wish to retain primarily because of their value during exceptional supply disruptions or military crises, despite insufficient ordinary commercial returns. These categories should not be conflated because the economic justification and appropriate financing instrument differ. Supporting an eligible renewable-fuel installation is not the same as procuring emergency access to a defined quantity of military fuel, and financing an infrastructure connection is not equivalent to compensating an operator for maintaining an otherwise uneconomic production unit.

Where a public authority identifies a specific security service, the appropriate intervention should begin by defining the service rather than selecting the company to receive support. Examples could include assured access to particular fuel specifications, the availability of emergency storage and delivery capacity, or the maintenance of an industrial capability whose loss would create a demonstrable security gap. The financial arrangement would then have to establish how performance is measured, how costs are verified, which public authority bears responsibility and how excessive compensation is prevented. Competitive procurement may be appropriate for certain services, but it will not always be feasible where the required infrastructure is geographically unique or where only a limited number of installations possess the relevant capability. In those cases, transparency concerning the public objective and the basis of compensation becomes particularly important.

A further complication concerns cross-border benefits. A refinery located in one member state may contribute to the security of neighbouring markets or military forces operating under multinational arrangements. The national government bearing the cost of intervention may therefore not capture the full security benefit. Conversely, a state may be reluctant to finance production capacity whose products are sold internationally during normal conditions. This divergence between the geographical distribution of costs and benefits strengthens the case for EU-level coordination, but it does not automatically establish that the Union should finance every strategic refinery. The appropriate institutional division depends on the legal competence, procurement responsibility and the demonstrable public service associated with the proposed investment.

The 15–20-year investment horizon as a problem of credibility rather than regulatory immobility

The refining industry’s request for long-term visibility should not be interpreted as a demand that environmental legislation remain unchanged for two decades. Such a position would be inconsistent with the technological and market changes that the sector itself must accommodate. The economically relevant objective is predictability about the direction of policy, the treatment of existing investments and the conditions under which strategically valuable capabilities will be remunerated. Regulatory credibility can exist alongside progressively more demanding environmental standards if the trajectory is sufficiently transparent and investors can understand the implications for project economics. Conversely, frequent changes to deadlines, eligibility rules or financial support conditions may increase perceived regulatory risk even where the underlying environmental objectives remain constant.

A credible framework should also distinguish the duration of an investment from the duration of a public commitment. A refinery conversion project may be expected to operate for many years, while a public procurement contract or state-aid instrument may have a shorter legal term. That mismatch can be managed through staged commitments, transparent renewal criteria and defined review procedures, rather than an unconditional promise to support a particular technology indefinitely. Such mechanisms would allow public authorities to respond to changing fuel demand and technology costs while preserving enough predictability to support capital investment.

The timing of existing legislation makes this issue particularly important. The Clean Industrial Deal State Aid Framework currently runs to the end of 2030, whereas the requested industrial investment perspective extends substantially beyond that date. ReFuelEU Aviation and FuelEU Maritime establish requirements reaching towards 2050, while the economics of conventional refining are influenced by demand trends that remain less certain. These different planning horizons create a regulatory landscape in which some obligations are legally defined over decades, but the financial mechanisms available to support industrial transformation may operate over shorter periods. The October dialogue will become economically consequential only if it addresses this asymmetry rather than simply reaffirming long-term environmental objectives and the present need for fuel security.

Chapter 9 — Key judgments

The October refining initiative cannot become a credible industrial strategy without reconciling the existing decarbonisation framework with explicit requirements for strategic production and supply resilience. Carbon pricing, renewable-fuel mandates and industrial state-aid rules already influence capital allocation, but they do not by themselves define which refinery capabilities Europe should retain for civilian or military security. The most important institutional requirement is a transparent distinction between commercial investment, eligible decarbonisation support and the procurement or preservation of identifiable security services. A durable 15–20-year framework should provide predictable regulatory treatment and measurable investment conditions without establishing unconditional protection for individual installations or weakening the accountability required for public financial intervention.

Chapter 10 — European Defence Fuel Sovereignty and Infrastructure Resilience

Strategic judgment: European defence-fuel sovereignty requires an integrated system of production, inventories, distribution rights and operationally usable fuel specifications; the ownership of domestic refining capacity is only one component of that system

The participation of NATO and the European Union Military Committee in the October 2026 refining dialogue introduces a question that European industrial policy has not yet fully translated into measurable economic obligations: what level of domestic fuel-production and distribution capability is necessary to support collective defence when normal commercial supply conditions deteriorate? The answer cannot be derived from national refinery capacity or statutory petroleum stocks alone because military fuel security depends on the quantity, specification, location and delivery rate of products available to armed forces. A country may possess substantial refining capacity while remaining unable to supply a particular operational location at the required tempo, just as a multinational logistics network may possess considerable storage infrastructure while remaining dependent on commercial refineries and maritime entry points for replenishment. The strategic value of fuel production therefore depends on its connection to the military logistics system and on the institutions responsible for ensuring continuity under conditions in which civilian and military requirements may compete.

Commissioner Andrius Kubilius used the dialogue to identify the military significance of European refining and fuel-distribution infrastructure, including the need for sufficient production, secure supply, effective transport during crises and protection of critical facilities. His intervention also raised the possibility of examining an eastward extension of the Central Europe Pipeline System in response to the requirements of the eastern flank. The published record does not establish an approved extension project, identified route, construction budget or completion schedule. The distinction is decisive because consideration of a potential infrastructure investment does not establish that it has entered procurement, received funding or become an operational capability. Nevertheless, the intervention demonstrates that the Commission’s conception of refining security extends beyond industrial production to include the geographical relationship between western European refining infrastructure and the locations where collective-defence operations could require substantial quantities of fuel. Press remarks by Commissioner Kubilius following the Dialogue with European refineries — European Commission — October 2026 Commission launches High-Level Dialogue with the European refining sector — European Commission — October 2026.

The distinction between fuel production, fuel ownership and assured military access

Military energy security requires three forms of assurance that are often treated as interchangeable but are institutionally and operationally distinct. The first is manufacturing assurance: the existence of installations capable of producing fuels that satisfy the required technical specifications under expected operating conditions. The second is supply assurance: the existence of accessible inventories, procurement arrangements and contractual rights that enable defence authorities to obtain those fuels when necessary. The third is delivery assurance: the practical ability to transport fuel from production or storage locations to designated military consumers within the required timeframe. A failure in any one of these dimensions can reduce operational readiness even when the other two remain adequate.

This distinction has important contractual consequences. Commercial refiners normally sell products under arrangements influenced by market conditions, logistics costs and the availability of alternative buyers. A military authority seeking assured supply must determine whether ordinary market procurement provides sufficient reliability or whether additional contractual rights are necessary. Such rights may concern priority access, product specifications, stockholding obligations, contingency distribution or the maintenance of specified industrial capabilities. The economic burden of providing these services differs according to their nature. Reserved inventory ties up working capital and storage space, while maintaining spare production capability may require investment in equipment that is not fully utilised during ordinary operations. Priority transport arrangements may affect the commercial use of pipelines or terminals. These costs should be identified separately to prevent public authorities from paying for capabilities that already exist under normal commercial conditions without securing additional, verifiable resilience.

The connection between procurement and industrial policy also creates a long-term planning problem. If military fuel demand is small relative to the commercial market during peacetime but can increase sharply during mobilisation, ordinary procurement volumes may not provide sufficient financial incentive to maintain the production flexibility required for exceptional demand. The state may therefore need to procure availability rather than immediate fuel deliveries. Such arrangements should be based on validated operational requirements and tested performance, rather than broad commitments by suppliers to support defence needs in principle.

NATO’s petroleum infrastructure: strategic value and institutional boundaries

NATO’s official description of its Pipeline System identifies approximately 10,000 kilometres of pipelines and related infrastructure across twelve Allied countries, with ten distinct systems and an aggregate storage capacity of approximately 4.1 million cubic metres. The Central Europe Pipeline System accounts for approximately 5,300 kilometres and connects installations in Belgium, France, Germany, Luxembourg and the Netherlands, including military depots, civilian facilities, refineries, ports and airports. NATO describes the network as capable of transporting jet fuel, gasoline, diesel and naphtha, while identifying military priority within the commercial arrangements governing civilian use. These characteristics demonstrate that Allied fuel infrastructure already incorporates a degree of dual-use economic organisation, with civilian utilisation contributing to the operating economics of facilities that retain a defence function. NATO Pipeline System — North Atlantic Treaty Organization — March 2025 Central Europe Pipeline System — North Atlantic Treaty Organization — official infrastructure assessment.

The strategic benefit of such infrastructure is not simply the volume of fuel stored within the system. Pipeline transport can provide continuous bulk movement between interconnected installations, while loading facilities allow distribution to locations not connected directly to the network. NATO’s documentation identifies the use of road and rail transport to supply installations outside the pipeline system, demonstrating the importance of combining fixed infrastructure with mobile logistics. The effective supply capacity of the network nevertheless depends on pump availability, product segregation, storage operations, loading facilities, maintenance conditions and the availability of suitable fuel at entry points. Its nominal length and aggregate storage capacity cannot establish the quantity of fuel that can be delivered to a specified military location over a particular period.

The geographical concentration of the Central Europe Pipeline System also creates an important distinction between established western European fuel infrastructure and potential requirements elsewhere. An eastward extension might improve the geographical reach of bulk distribution, but the value of such an investment would depend on the requirements it is intended to satisfy, the availability of alternative supply routes, expected civilian utilisation and the cost of constructing and maintaining additional infrastructure. Extending a pipeline network without corresponding arrangements for fuel procurement, storage, reception and terminal distribution would not necessarily resolve a military supply problem. Conversely, improving the resilience of existing facilities, increasing loading capacity or establishing redundant transport arrangements could sometimes deliver security benefits without constructing an entirely new long-distance pipeline.

Fuel interoperability and the operational limits of product substitution

Fuel interoperability is another dimension that requires more detailed treatment than a general distinction between diesel and jet fuel. Military platforms and associated logistics systems may use products whose specifications are related to civilian fuels but whose handling, quality assurance and operational requirements differ. The ability to substitute one product for another depends on the technical approval of the relevant equipment, the fuel standard, the operating environment and the procedures established by the responsible military authority. It is therefore inappropriate to assume that all civilian diesel can be used interchangeably in military vehicles or that every commercially available aviation fuel meets the needs of all military aircraft without further verification.

The growing use of renewable hydrocarbons adds complexity to this issue. Certain approved renewable-fuel pathways can produce components suitable for blending into aviation fuel, while renewable diesel may satisfy applicable standards for selected uses. However, eligibility under environmental legislation does not automatically establish military interoperability. The latter depends on fuel qualification, blending limits, material compatibility, storage stability and the operational approvals governing the equipment involved. A defence-oriented refining strategy should consequently distinguish regulatory sustainability compliance from technical suitability for military applications.

The institutional significance is that environmental regulators, fuel producers and defence procurement authorities operate according to different decision criteria. Environmental legislation may establish sustainability and emissions requirements, while defence authorities require demonstrated operational performance and reliable supply. The two objectives can be compatible, but compatibility must be established through testing, certification and appropriate procurement specifications. A policy that assumes all renewable-fuel production contributes immediately to military supply could overstate available capability, while a policy that excludes renewable hydrocarbons categorically could overlook technically viable alternatives.

Strategic stocks and the distinction between civilian emergency management and military sustainment

The EU’s oil-stockholding framework establishes a statutory obligation under Directive 2009/119/EC requiring member states to maintain emergency stocks equivalent to at least the greater of 90 days of average daily net imports or 61 days of average daily inland consumption. The Directive also contains provisions addressing the physical accessibility of stocks, including arrangements enabling their release or delivery under conditions appropriate to alleviating supply difficulties. This legal structure is relevant to defence fuel security because it provides a national and European framework for responding to petroleum-supply disruptions, but its calculation is not based on the fuel requirements of a particular military operation. Council Directive 2009/119/EC, Articles 2 and 3 — Council of the European Union — September 2009.

The practical contribution of emergency stocks depends on the form in which they are held and the infrastructure through which they can be accessed. Stocks held as crude oil require operational refining capacity before they can replenish finished-product markets, while stocks held as finished fuels may be more immediately available for particular applications but depend on suitable transport, storage and handling arrangements. Military requirements can add additional constraints relating to product quality, geographical positioning and priority access. As a result, statutory compliance cannot be treated as equivalent to military endurance, and the existence of a legally adequate national stockholding position does not prove that every relevant military installation has sufficient accessible fuel.

A comprehensive defence-fuel assessment should therefore connect national emergency stocks, commercial inventories, dedicated military reserves and production availability through a common operational framework. The quantities should be reported according to their individual ownership and release conditions, with clear distinctions between products and locations. Without such reconciliation, the same physical inventory could be counted under different institutional descriptions, or a national stockholding total could be misinterpreted as immediately available military supply.

Critical-infrastructure resilience and the consequences of geographical concentration

The protection of refining and fuel-distribution infrastructure introduces another institutional responsibility that extends beyond the commercial refining sector. Refineries, pipelines, storage terminals, maritime facilities, electricity connections and industrial control systems can be affected by accidental outages, natural events, physical attacks and cyber incidents. The security consequence depends on the importance of the affected installation, the duration of the interruption and the availability of alternative routes or production sources. A highly concentrated logistics network can provide substantial economies of scale and operational efficiency during normal conditions while creating dependencies on a relatively limited number of facilities.

The appropriate response is not automatically to duplicate every major installation. Redundancy can be created through alternative transport routes, diversified supply relationships, distributed storage, cross-border cooperation and the ability to redirect production within existing industrial systems. Each option has different capital and operating costs, while its value depends on the disruptions it is intended to withstand. For example, additional storage may mitigate temporary delivery interruptions but cannot independently replace sustained lost production. An alternative port may improve maritime access but offer limited benefit if inland distribution remains constrained. Cybersecurity improvements may reduce the probability of operational disruption without addressing physical fuel scarcity. These distinctions should form part of any cost-benefit assessment of future EU and NATO-related infrastructure programmes.

The European legal framework for critical-entity resilience is relevant because it establishes obligations and coordination arrangements concerning the resilience of entities providing essential services. Directive (EU) 2022/2557 addresses critical entities, including those operating in relevant energy sectors, while Directive (EU) 2022/2555 establishes the NIS2 cybersecurity framework for covered entities and sectors. Their implementation does not itself guarantee the continuity of petroleum production or military fuel distribution, but they provide an existing regulatory architecture that can be connected to the Commission’s refining-security initiative. Future proposals should therefore avoid duplicating obligations without establishing how compliance improves identifiable operational capabilities. Directive (EU) 2022/2557 on the resilience of critical entities — European Parliament and Council — December 2022 Directive (EU) 2022/2555 on measures for a high common level of cybersecurity — European Parliament and Council — December 2022.

Defence-fuel capability and institutional responsibility

Capability	Primary responsibility	Relevant European or NATO role	Evidence required for assurance	Principal failure mechanism
Military fuel requirement definition	National defence authorities and Allied military planning structures	NATO coordination	Validated product, quantity, location and delivery requirements	Incomplete or incompatible planning assumptions
Domestic fuel production	Commercial operators under national regulation	EU industrial and energy-policy coordination	Verified operating capacity and specifications	Commercial closure or production interruption
Fuel procurement	National defence procurement organisations and authorised multinational structures	NATO procurement support where applicable	Contracts, priority provisions and supplier performance	Inability to obtain sufficient products during disruption
Emergency petroleum stocks	EU member states and designated stockholding entities	EU and IEA coordination	Product-level inventories and accessible release arrangements	Stocks unavailable at required location or specification
Bulk pipeline distribution	National system operators and multinational arrangements	NATO Pipeline System and CEPS structures	Operational throughput, maintenance and access arrangements	Physical or operational network bottlenecks
Maritime reception	Port authorities, terminal operators and relevant national authorities	National and cross-border coordination	Terminal capacity, security and alternative routes	Port disruption or inadequate inland connections
Road and rail distribution	Commercial operators and competent public authorities	National military mobility and logistics coordination	Available loading, vehicle and route capacity	Insufficient onward distribution
Critical-infrastructure protection	National security authorities and operators	EU resilience and cybersecurity frameworks; NATO coordination	Tested security and recovery arrangements	Extended infrastructure outage
Renewable-fuel interoperability	Defence technical authorities and fuel suppliers	Relevant fuel-standardisation and procurement arrangements	Qualification and operational acceptance	Product technically unsuitable for intended equipment

The most consequential capability gap cannot be inferred from the number of refineries or kilometres of pipeline alone. It lies in the relationship between validated military fuel requirements and the demonstrated ability to meet those requirements under specific disruption conditions. Publicly available European and NATO records establish that the relevant infrastructure and institutional frameworks exist, but they do not provide a complete, auditable account of wartime fuel endurance at the level required to quantify the strategic shortfall. Any public assessment should preserve that limit rather than attribute unsupported reserve levels or operational delivery capacities to national armed forces.

Chapter 10 — Key judgments

European defence-fuel sovereignty is best understood as assured access to compliant fuels through a resilient industrial and logistics system, not as complete national self-sufficiency in petroleum production. NATO’s established infrastructure demonstrates the importance of multinational distribution and military-priority arrangements, while the Commission’s October initiative creates an opportunity to link those requirements to the future of European refining. The principal unresolved issue is the absence of a publicly established relationship between operational military fuel demand and the industrial and logistical capacity required to meet it under stress. The most important policy response is to define the necessary security services, identify the responsible institutions and ensure that procurement, infrastructure investment and refinery policy are based on compatible operational requirements.

Chapter 11 — Competing Industrial Pathways, Risks and Early-Warning Indicators

Strategic judgment: the decisive uncertainty for 2026–2031 is whether strategic recognition changes refinery investment behaviour before commercial rationalisation and technological transformation alter the remaining industrial base

The European refining industry enters the 2026–2031 period with several distinct forces acting simultaneously on investment decisions. The Commission has acknowledged the sector’s strategic relevance to energy security and defence, but it has not yet established a binding capacity-retention framework. Existing environmental legislation creates progressively stronger incentives for decarbonisation, while conventional refinery profitability remains influenced by international competition, product demand, crude acquisition costs and the capital expenditure required to maintain ageing installations. Renewable-fuel mandates create opportunities for new industrial investment, although the associated projects depend on feedstock availability, technological performance and the financing of new production capacity. In parallel, geopolitical disruption increases the immediate value of domestic fuel manufacturing and distribution capabilities without necessarily providing companies with a predictable revenue stream over the full life of their investments. These forces can produce very different industrial outcomes even if the political language surrounding strategic refining remains broadly unchanged.

The relevant forecast horizon should therefore be organised around observable investment and policy decisions rather than unsupported predictions of future refinery closures or oil prices. The period to 2031 is sufficiently long for some announced industrial projects to reach commissioning, for the first 2030 renewable-fuel requirements to take effect and for European institutions to determine whether the October dialogue leads to regulatory or financial measures. It is not sufficiently long to establish the complete transformation of European aviation, freight transport or defence logistics away from conventional liquid fuels. The strongest evidence-based scenarios consequently concern the structure of European refining capacity, the availability of alternative-fuel production, institutional coordination and the persistence of external supply dependence.

Pathway A: coordinated strategic capacity retention and industrial transformation

Under the first pathway, European institutions and member states convert the October initiative into a coherent refining strategy that defines strategically necessary production capabilities, establishes credible investment conditions and coordinates conventional capacity retention with renewable-fuel development. The central mechanism would be the identification of a limited set of industrial and logistical capabilities whose availability produces demonstrable security benefits. Rather than subsidising the entire conventional refining sector, public intervention would target specific services or infrastructure requirements, subject to transparent eligibility, performance and cost controls. Commercial operators would remain responsible for ordinary industrial investment and market operations, while public authorities would assume defined responsibilities where the value of security-related availability exceeds the returns available through normal commercial activity.

Such a framework could improve investment confidence by reducing uncertainty over the treatment of strategically relevant capacity. It might also support the integration of renewable-fuel projects with existing refining and logistics infrastructure where doing so preserves commercially valuable capabilities and reduces transition costs. The pathway would be consistent with the Commission’s stated intention to pursue a joint transformation roadmap and with the industry’s preference for greater long-term visibility, but its implementation would require decisions not contained in the October announcement. Most importantly, authorities would need to define the required capabilities, establish the economic basis for intervention and determine how responsibilities are divided among EU institutions, national governments, defence organisations and commercial operators. Commission launches High-Level Dialogue with the European refining sector — European Commission — October 2026 FuelsEurope response to the High-Level Dialogue — October 2026.

The pathway would be supported by evidence of concrete investment decisions that preserve or improve strategic fuel production, formal procurement arrangements for security-related services, infrastructure projects linked to demonstrated military requirements and successful commissioning of renewable-fuel facilities. It would be weakened if the roadmap remained exclusively declaratory, if the identified security capabilities lacked financing or if regulatory uncertainty continued to prevent necessary investment. A further complication is that successful strategic capacity retention need not imply an increase in the number of European refineries. Some installations could close or convert while the remaining system becomes more resilient through improved product flexibility, diversified feedstocks, accessible stocks and stronger distribution arrangements. The relevant outcome is therefore secure deliverable capability rather than a predetermined number of operating sites.

Pathway B: selective conversion and continued commercial rationalisation

The second pathway is characterised by a continuation of market-led restructuring alongside investment in commercially attractive renewable-fuel technologies and selected conventional refinery upgrades. Under this outcome, operators undertake projects supported by expected product margins, regulatory demand and existing industrial advantages, while facilities facing weak profitability or substantial capital requirements remain exposed to rationalisation. The Commission’s dialogue may improve coordination and regulatory understanding without fundamentally altering the financial conditions governing all conventional refining installations. This pathway is consistent with the fact that major European companies had already initiated renewable-fuel investment programmes before October 2026, demonstrating that industrial transformation does not necessarily depend on the new strategic dialogue.

The principal advantage of this pathway is that capital allocation remains substantially linked to commercial competitiveness and identifiable regulatory demand. It may avoid excessive public expenditure on installations whose future economic role is limited, while supporting technology deployment at sites where conversion is technically and financially attractive. Its principal weakness is that commercially rational decisions at the level of individual operators may fail to preserve capabilities whose value is collective and becomes apparent primarily during exceptional disruptions. A refinery whose closure appears economically justified under ordinary market assumptions may nevertheless provide geographical supply diversity, specific product capabilities or important logistical connections that cannot be replaced rapidly. Without an explicit mechanism for valuing these benefits, selective market-led restructuring can continue to reduce strategic options even where aggregate fuel markets remain adequately supplied.

The distinguishing indicators would include continued investment in commercially attractive renewable-fuel facilities, selective conventional refinery upgrades, project cancellations or delays where economics deteriorate, and further closures of installations unable to secure sufficient returns. A major test would be whether the European system retains adequate middle-distillate production and distribution flexibility after these changes. The pathway should not be classified automatically as a policy failure: its adequacy depends on the security capabilities remaining at the end of the restructuring process. Equally, it should not be treated as successful merely because the aggregate quantity of renewable-fuel capacity increases.

Pathway C: strategic recognition without durable industrial implementation

The third pathway is one in which the October dialogue produces further political statements and technical consultations but does not materially alter investment incentives or the financial responsibilities associated with strategic fuel capacity. Under this outcome, short-term price concerns receive substantial attention, while the more difficult questions concerning refinery viability, defence procurement and infrastructure investment remain unresolved. Conventional installations continue to operate according to commercial economics, and renewable-fuel projects progress or stall according to their individual financing and feedstock conditions. The Commission’s acknowledgement of the strategic importance of refining remains politically significant but does not translate into an identifiable industrial capability that would otherwise have been lost.

This pathway is distinct from ordinary market-led restructuring because it involves a failure to complete the institutional response after a specific strategic-security problem has been recognised. Its consequences would be particularly important if additional refinery closures occurred in locations where capacity was later found to be necessary for civilian or military resilience. The resulting costs might include increased dependence on imported products, reduced geographical flexibility and the need to finance replacement infrastructure under less favourable conditions. However, those consequences would have to be demonstrated through evidence of the capabilities lost and the alternatives available; the mere occurrence of further closures would not establish that every affected installation was strategically indispensable.

The pathway would become increasingly credible if technical follow-up produced no published implementation programme, if responsibility for strategic fuel procurement remained undefined and if no verifiable investments addressed the principal supply-security gaps. It would be weakened by the adoption of financed measures tied to operational requirements, even if those measures were limited in scope. The central policy risk is not the absence of an ambitious political statement, but the persistence of a gap between the security value attributed to refining and the financial incentives available to maintain the capabilities that provide that value.

Comparative assessment of the three pathways

Dimension	Coordinated retention and transformation	Selective commercial adaptation	Declaratory recognition without implementation
Principal mechanism	Capability-based public and private investment coordination	Operator-led investment and rationalisation	Political dialogue without substantive change in investment incentives
Conventional capacity	Selected strategic capability retained	Capacity determined mainly by commercial viability	Continued exposure to market-led closure without security safeguards
Renewable-fuel investment	Integrated with security and transformation objectives	Driven by regulatory demand and project economics	Progress dependent on existing commercial programmes
Defence integration	Formal requirements and procurement arrangements	Limited to economically viable or existing arrangements	Requirements remain insufficiently connected to industrial investment
Fiscal exposure	Potentially higher but targeted public commitments	Lower direct intervention, depending on national measures	Limited direct intervention but possible future security costs
Principal risk	Excessive support, poor project selection or regulatory complexity	Loss of commercially unremunerated strategic capabilities	Delayed response until options become difficult to restore
Principal strength	Potentially aligns security requirements and investment	Preserves commercial discipline and selective efficiency	Avoids immediate intervention costs
Evidence supporting outcome	Funded measures, operational contracts, commissioning and verified capacity	Company decisions, selective conversions and continuing restructuring	Absence of follow-through and unresolved strategic requirements
Assessment at 29 October 2026	Plausible but unproven	Consistent with existing market dynamics	Material implementation risk, not an established outcome

No numerical probabilities are assigned to these pathways because a reproducible base rate or calibrated forecasting model has not been established. The pathways are also not strictly mutually exclusive at the level of individual refineries: different installations may experience different trajectories even within a broadly coordinated European policy framework.

The 2026–2031 decision sequence and the significance of leading indicators

The most useful early-warning indicators are those that precede irreversible investment or closure decisions. Political declarations are relatively weak indicators because they do not necessarily change project economics. Published regulatory proposals, financing approvals, investment commitments, permitting decisions and procurement contracts offer stronger evidence, although they remain distinct from commissioned industrial capacity. The strongest operational indicators are verified changes in available product output, storage and transport capability, together with evidence that specific security requirements can be met under defined disruption conditions.

The period to 2031 can be divided into a sequence of institutional and industrial milestones. These are analytical monitoring windows, not forecasts that the relevant decisions will necessarily occur.

Monitoring window	Principal evidence to examine	Positive implementation signal	Warning signal
Late 2026–early 2027	Commission–industry technical follow-up and next dialogue	Defined work programme, responsible authorities and measurable objectives	Continued discussion without implementation responsibilities
2027	Publication and content of the joint refining roadmap	Specific investment and capability measures	Broad strategic language without operational or financial commitments
2027–2028	Company investment decisions and renewable-fuel commissioning	Projects enter operation and conventional capability changes are transparently measured	Repeated delays, cancellations or unclear capacity reporting
2028–2029	Defence-related procurement and infrastructure decisions	Validated requirements linked to funded contracts or infrastructure measures	Persistent separation between military requirements and commercial supply arrangements
2030	ReFuelEU Aviation obligations and conclusion of the current CISAF period	Regulatory compliance accompanied by competitive European production	Compliance increasingly dependent on imports or inadequate domestic investment
2031	Five-year industrial-security review	Demonstrable improvements in secure fuel supply and distribution	Reduced industrial options without verified equivalent alternatives

The 2030 boundary is especially important because it coincides with the first significant increase in ReFuelEU Aviation’s sustainable-fuel requirement and the scheduled end of the current Clean Industrial Deal State Aid Framework. The juxtaposition creates a policy coordination problem: some renewable-fuel investment obligations extend well beyond the availability of the currently defined state-aid framework. The appropriate response is not necessarily to extend every existing financing measure, but to establish sufficient visibility concerning the rules that will govern future investments. Without such visibility, companies may delay projects or favour jurisdictions offering more predictable commercial conditions. ReFuelEU Aviation Regulation — European Parliament and Council — October 2023 Clean Industrial Deal State Aid Framework — European Commission — June 2025.

Geopolitical and market risks that can alter the industrial trajectory

The principal external risk is that geopolitical disruption changes the relative availability and cost of crude oil, refined products and alternative feedstocks faster than European industry can adjust its production and logistics arrangements. In such circumstances, refining capacity may become more commercially valuable in the short term, but that does not necessarily improve long-term investment confidence. Temporary margins can support operating cash flow without providing a reliable basis for financing investments expected to remain productive for decades. Equally, a period of lower oil prices and comfortable product availability may reduce political attention to strategic refining even though the underlying vulnerability to future disruption remains. The durability of the October initiative will therefore be tested not only during periods of high prices, but also when market conditions make industrial security less politically urgent.

Another risk concerns the interaction between renewable-fuel expansion and the availability of eligible feedstocks. Regulatory mandates create demand, but investments may become less competitive if feedstock prices increase sharply or supply chains fail to deliver sufficient certified material. Synthetic fuels introduce a different set of risks involving electricity costs, hydrogen production, carbon sourcing and industrial scale-up. In both cases, delays could widen the gap between the expected reduction in conventional capacity and the availability of alternative production. This would be particularly problematic if conventional refinery closures were justified using assumptions about substitute fuel production that subsequently proved too optimistic.

The risk of industrial underinvestment also has a cumulative dimension. Refineries facing uncertainty may postpone discretionary maintenance or modernisation investments, potentially weakening reliability before any formal closure decision occurs. The deterioration of capital investment can therefore precede the disappearance of nominal capacity, creating a period in which the installed industrial base appears stable while its future operational resilience declines. Monitoring only the number of operating refineries would fail to detect this process. Investment decisions, maintenance expenditure and operational performance should consequently form part of the early-warning framework.

Chapter 11 — Key judgments

The 2026–2031 outlook is determined principally by whether political recognition produces measurable changes in investment conditions and secure-fuel capabilities. Coordinated capacity retention, selective commercial transformation and declaratory policy without implementation remain plausible pathways, with no defensible basis for assigning numerical probabilities. The strongest indicators will be formal regulatory measures, financed investments, commissioning results, infrastructure decisions and procurement arrangements tied to demonstrated security requirements. The principal danger is that conventional capacity continues to decline while alternative-fuel production and logistics infrastructure develop more slowly than expected, creating a period of reduced industrial flexibility and continuing external dependence.

Chapter 12 — Strategic Policy Options and Final Net Assessment

Strategic judgment: Europe should establish a capability-based refining security framework that preserves essential fuel-production and distribution functions without committing public resources to indiscriminate refinery protection or undermining the long-term decarbonisation trajectory

The European Commission’s October 2026 dialogue creates an opportunity to correct a significant deficiency in the relationship between industrial policy and energy security: the absence of a sufficiently explicit framework for determining when domestic production capabilities should be retained because their collective security value exceeds their commercial return. The issue cannot be resolved by treating every refinery as indispensable, nor by assuming that international fuel markets will necessarily provide reliable substitutes when existing European installations close. The appropriate policy response is a structured system for evaluating the availability of strategically necessary products, identifying infrastructure and production capabilities whose loss would create disproportionate vulnerabilities, and determining which public institutions are responsible for ensuring that those capabilities remain accessible. Such a system must distinguish conventional fuel production, renewable-fuel transformation and military logistics while recognising their practical interdependence.

A credible European framework would begin with the identification of the fuel-security outcomes that governments intend to achieve. Those outcomes should be defined in operational rather than purely political terms: availability of specified fuels, continuity of supply to essential civilian consumers, access to necessary inventories, functioning distribution connections and the ability to support validated military requirements under defined disruption conditions. Once those outcomes have been established, policymakers can determine whether they are best achieved through refinery investment, storage arrangements, alternative sourcing, logistics infrastructure or a combination of measures. This sequence is important because selecting particular installations for protection before defining the required capability can create inefficient subsidies, distort competition and preserve capacity that does not materially improve security.

The institutional architecture must also reflect the distribution of legal responsibilities. The European Commission can coordinate the refining roadmap, propose regulatory measures and assess the compatibility of industrial support with EU law. Member states retain essential responsibilities for emergency oil stocks, national security, infrastructure protection and defence procurement. NATO provides an established framework for military requirements and relevant logistics coordination, while commercial operators control many of the production and distribution assets through which fuel reaches final consumers. The success of the initiative consequently depends on connecting institutions that possess different competences and incentives, rather than creating a single political body expected to exercise authority over the entire fuel system.

Policy Option I — Establish a European Strategic Fuel Capability Assessment

The first and highest-priority option is to establish a coordinated assessment of Europe’s strategically necessary fuel-production and distribution capabilities. Its purpose would not be to create another aggregate refinery-capacity inventory, since such statistics already exist, but to determine whether the industrial and logistical system can satisfy defined civilian and military requirements under credible disruption conditions. The assessment should distinguish crude-processing capacity from finished-product output, identify the availability of specification-compliant middle distillates, examine refinery operating flexibility and connect production with storage and distribution infrastructure. National authorities would provide the relevant energy-security and industrial information, while defence requirements would be supplied through competent national and Allied institutions subject to appropriate confidentiality controls.

The Commission’s Directorate-General for Energy would be a natural coordinator of the civilian energy-security dimension, working with the Directorate-General for Defence Industry and Space, national authorities and relevant EU bodies. NATO participation would be necessary where the assessment concerns Allied military fuel requirements or the resilience of NATO-linked infrastructure, but this coordination would not transfer control of national military planning to the Commission. Commercial operators would contribute technical information concerning production capability, maintenance requirements and the costs of maintaining additional flexibility, with commercially sensitive data protected under appropriate arrangements.

The principal benefit would be the creation of a defensible evidentiary basis for investment decisions. Instead of arguing generally that domestic refining is strategically important, authorities could identify the particular capabilities that would be difficult to replace and determine whether those capabilities are already adequately supported by commercial markets. The principal implementation burden would involve data collection, confidentiality, compatibility of national reporting systems and the need to avoid disclosing sensitive infrastructure information. The measure would be relatively reversible because its initial output would consist of assessment and planning rather than irreversible industrial commitments, but its value would depend on subsequent policy decisions.

Policy Option II — Introduce targeted strategic fuel-availability contracts

The second option is to establish legally appropriate arrangements through which public authorities can procure the continued availability of identified fuel-security services. These could involve contractual rights to specified fuel volumes, priority access under defined conditions, reserve production capability or the maintenance of particular logistics arrangements. The purpose would be to compensate operators for services that provide demonstrable public value but may not generate sufficient revenue during normal commercial conditions.

Such arrangements would require careful economic design. A contract compensating an operator for reserve availability should specify what is being maintained, how availability is verified, the conditions under which the service can be activated and the consequences of non-performance. Payment structures should distinguish fixed availability costs from the variable costs of delivering fuel during a crisis, while preventing the same service from receiving overlapping compensation under different public programmes. Where feasible, competitive procurement should be used to identify the least-cost provider capable of meeting the requirement. Where infrastructure is geographically unique, independent cost verification and transparent eligibility criteria would become more important.

The legal feasibility of these contracts would depend on their precise structure, the relevant procurement authority and their interaction with EU competition and state-aid rules. The October dialogue did not establish a general legal exemption for refinery subsidies. Accordingly, the appropriate route should be determined through an explicit assessment of the applicable legal framework rather than through an assumption that national security automatically permits unrestricted public financing. The option’s principal risk is that poorly designed contracts could preserve excessive capacity, weaken commercial discipline or create long-term public obligations whose benefits are difficult to verify. Its principal advantage is that it would translate strategic recognition into measurable services without necessarily requiring the permanent protection of individual installations.

Policy Option III — Establish an integrated conventional and renewable-fuel investment framework

The third option concerns the relationship between conventional refinery retention and renewable-fuel transformation. A credible programme should distinguish investments that add alternative-fuel capability from those that replace existing conventional production, because the consequences for national fuel security differ. Project evaluation should identify the current industrial functions of the installation, the capabilities retained after conversion, the additional products created and the expected effects on feedstock sourcing, utilities and distribution.

The existing renewable-fuel regulatory framework provides a basis for such an approach, but it does not eliminate the need for project-specific economic analysis. ReFuelEU Aviation and FuelEU Maritime create demand signals, while the Clean Industrial Deal State Aid Framework provides potential instruments for eligible industrial transformation. These mechanisms should be coordinated so that conversion projects are assessed against both environmental performance and their contribution to secure fuel availability. The objective would not be to impose a conventional-production obligation on every biorefinery, but to avoid a situation in which strategically valuable capabilities disappear without a demonstrated alternative. ReFuelEU Aviation — European Parliament and Council — October 2023 Clean Industrial Deal State Aid Framework — European Commission — June 2025.

The implementation burden would fall on operators, regulators, permitting authorities and financing institutions. The principal risk is that governments could establish excessively complex conditions that delay otherwise commercially justified projects. The framework should therefore concentrate on installations whose transformation has a demonstrable effect on identified security capabilities, rather than requiring every renewable-fuel investment to undergo an unnecessarily broad strategic assessment.

Policy Option IV — Strengthen multinational fuel-distribution resilience

The fourth option is to connect refinery and storage policy with the protection and development of transport infrastructure. Fuel produced within Europe contributes to security only when it can be delivered to the required consumers, making pipelines, ports, terminals, loading facilities and alternative distribution routes integral to the industrial-security assessment. The established NATO Pipeline System provides a relevant framework for military logistics, but its geographical coverage and operational configuration must be evaluated against contemporary requirements rather than assumed to be sufficient because of its historical scale.

The assessment should prioritise existing infrastructure improvements and route redundancy before committing to major new construction. Investments in loading facilities, terminal resilience, storage accessibility and alternative transport arrangements may provide substantial benefits where they address identifiable bottlenecks. More extensive projects, including potential pipeline extensions, would require verified requirements, feasibility studies, environmental assessments, financing arrangements and decisions by the competent national and multinational authorities.

The principal benefit would be improved access to fuel already produced or stored within Europe, potentially reducing the amount of additional industrial capacity required to achieve an equivalent security outcome. The principal risk is that infrastructure investment could be directed towards politically attractive projects that do not resolve the most important operational constraints. Every major project should therefore be linked to a defined service requirement and assessed against alternative investments offering comparable resilience.

Policy Option V — Establish a 15–20-year regulatory and investment-visibility mechanism

The fifth option is to provide an integrated long-term framework through which refinery operators and investors can understand the relationship between emissions obligations, renewable-fuel development, industrial competitiveness and strategic capacity requirements. The objective should be credible visibility rather than regulatory immobility. Environmental and industrial policies will continue to evolve, but companies should be able to assess the principal investment conditions and the mechanisms through which material changes will be implemented.

A practical framework could include periodic reviews of strategic fuel requirements, transparent criteria for selecting eligible projects, defined rules for public support and a structured relationship between regulatory deadlines and industrial implementation capacity. Such a system would reduce the risk that companies respond to temporary political uncertainty by postponing investments or accelerating closures that are difficult to reverse. It would also allow public authorities to revise security requirements as technology and demand evolve, avoiding an unconditional obligation to preserve conventional refining indefinitely.

The relevant institutional challenge is particularly pronounced beyond 2030, when the current Clean Industrial Deal State Aid Framework reaches its scheduled end while renewable-fuel requirements continue to increase. The long-term investment framework must therefore address how existing and future instruments will interact, while respecting the legislative authority of the European Parliament and Council and the responsibilities of member states. A 15–20-year industrial perspective cannot substitute for the legal processes required to enact or amend binding legislation.

Comparative policy decision matrix

Policy option	Principal authority	Intended effect	Implementation burden	Indicative time-to-effect	Reversibility	Principal downside
Strategic Fuel Capability Assessment	Commission, member states, competent defence authorities, NATO coordination	Identifies critical fuel capabilities and gaps	Data integration, confidentiality and operational validation	Initial framework within a planning cycle; full assessment dependent on data	High	Incomplete or inconsistent data could misdirect investment
Strategic fuel-availability contracts	National procurement authorities and relevant public institutions	Maintains defined production, storage or access services	Contract design, financing, legal review and performance monitoring	Contract-dependent; potentially faster where capability already exists	Medium	Overcompensation or preservation of unnecessary capacity
Integrated refinery and renewable-fuel transformation framework	EU and national regulators, operators, financing institutions	Coordinates decarbonisation with capability retention	Project evaluation, regulatory alignment and investment	Project-dependent, frequently several years	Medium to low after major investment	Delayed projects or inefficient technology selection
Fuel-distribution resilience programme	National governments, infrastructure operators, NATO-related bodies	Improves delivery security and alternative routing	Engineering, permitting, infrastructure financing and coordination	Months for limited improvements; years for major construction	Low for major fixed assets	High costs without proportionate operational benefit
Long-term regulatory visibility framework	EU institutions and member states	Reduces investment uncertainty	Legislative, regulatory and institutional coordination	Progressive; depends on adoption of measures	Medium	Excessive rigidity or commitments inconsistent with changing demand
Periodic security-capability review	Commission, member states and relevant operators	Prevents outdated capacity assumptions	Recurring reporting and verification	Annual or multiannual review cycle	High	Administrative burden without effective policy response

The implementation periods are analytical categories and should not be interpreted as approved schedules, project commitments or guaranteed completion dates. The financing requirements of individual options cannot be responsibly quantified without engineering studies, procurement specifications and validated security requirements.

Decision thresholds: when political recognition should become binding action

A central weakness of industrial-security policy is that governments frequently identify strategic importance without defining the circumstances under which intervention becomes justified. The European refining framework should avoid this ambiguity by linking each form of public action to an observable capability gap. Such thresholds should not be based solely on the number of refinery closures, a particular oil-price level or the aggregate quantity of products imported into Europe. These indicators may be relevant, but none independently establishes that a security failure is imminent or that public intervention would improve resilience.

A more defensible approach would establish thresholds based on the inability of commercial production, accessible inventories and alternative supply arrangements to satisfy validated requirements under defined disruption conditions. Where the gap concerns production, the relevant intervention may involve maintaining or improving refinery capability. Where the gap concerns geography, infrastructure and logistics may be more effective. Where the problem concerns uncertainty about future investment, regulatory coordination and financing instruments may be appropriate. The intervention should therefore be selected according to the mechanism of vulnerability rather than the political visibility of the affected installation.

Decision condition	Evidence required	Potential policy response	Condition that would weaken the case for intervention
Critical fuel production cannot be replaced within an acceptable disruption period	Validated demand, production and substitution assessment	Targeted capacity-retention or availability arrangements	Equivalent secure supply demonstrably available at lower cost
Fuel stocks exist but cannot be delivered reliably	Transport capacity and operational accessibility assessment	Distribution and storage improvements	Existing routes demonstrably satisfy requirements
Conversion would eliminate a uniquely important conventional capability	Site-level product and security-impact assessment	Phased conversion or capability-preservation measures	Remaining system provides equivalent validated capability
Investment is delayed primarily by regulatory uncertainty	Operator investment evidence and applicable legal analysis	Clarified regulatory framework and predictable eligibility	Project remains uneconomic under credible stable conditions
Military procurement cannot assure specified products	Validated military requirements and contract assessment	Priority procurement or availability contracts	Existing procurement already satisfies resilience requirements
Infrastructure disruption produces unacceptable concentration risk	Network resilience and alternative-route assessment	Redundancy, protection or alternative logistics	Existing alternatives meet the defined service requirement

These thresholds do not prescribe numerical quantities because the required public evidence is insufficient to establish appropriate EU-wide values. The absence of invented thresholds is important: a decision rule based on unsupported figures could impose substantial costs while failing to protect the capabilities that actually matter.

Financing discipline and the distribution of public and private risk

The economic durability of a European refining strategy will depend on whether its financing architecture distinguishes commercial returns from public security benefits. Conventional refining companies should remain responsible for investments justified by expected market demand and operating margins. Public financing should be considered where a defined collective objective cannot be delivered reliably through ordinary commercial incentives and where the proposed measure satisfies the applicable legal and economic requirements. This distinction is particularly important because the refining sector contains assets of very different age, complexity, location and profitability. A uniform support mechanism could therefore reward installations that would remain commercially viable without intervention while providing insufficient assistance to genuinely critical capabilities.

The financial appraisal of proposed interventions should incorporate capital expenditure, operating costs, expected product revenues, carbon-related costs, financing conditions and the value of alternative uses of the asset. It should also identify the cost of not intervening, but that cost must be assessed through a defensible counterfactual rather than assumed to equal the replacement value of the facility. For example, the closure of an installation may increase product-import dependence without creating a material supply-security deficit where alternative infrastructure and diversified suppliers are sufficient. In another location, the loss of a comparatively modest production or storage capability could create a significant vulnerability because of limited transport alternatives. The economic justification for intervention should reflect these differences.

The costs of industrial capability retention should also be allocated according to the beneficiaries and the responsible institutions. National fuel-security obligations may justify national expenditure, while cross-border infrastructure or Allied military requirements may support coordinated multinational arrangements. The precise financing route must follow from the relevant legal competence and the service being procured. This approach is more economically defensible than establishing a general refinery-support fund whose objectives remain insufficiently differentiated between competitiveness, decarbonisation and defence.

Italy’s role within the final European policy settlement

Italy should occupy a significant position in the development of a European strategic refining framework because of the scale and diversity of its conventional and renewable-fuel industrial system, its Mediterranean geography and its access to major domestic and international transport markets. However, Italy’s national interest should not be defined solely in terms of retaining the largest possible quantity of crude-processing capacity. The more relevant objective is to preserve a resilient combination of industrial capabilities capable of meeting national product demand, supporting strategically important supply chains and contributing to European fuel availability under disruption.

The country’s existing industrial assets provide several different policy options. Facilities retaining sophisticated conventional processing can be assessed for their contribution to middle-distillate production, feedstock flexibility and secure distribution. Partial-conversion projects can be evaluated according to whether they add renewable-fuel production without weakening essential conventional capability. Complete conversions require a more explicit assessment of the industrial functions lost and the reliability of replacement supply. Existing biorefineries can contribute to renewable-fuel availability, but their resilience depends on eligible feedstocks and supporting infrastructure. These distinctions should inform the national contribution to the European roadmap rather than being subordinated to a single measure of aggregate processing capacity.

An Italian strategy would also need to recognise the importance of ownership and investment autonomy. The state does not directly determine every refinery’s commercial decisions, while European competition and environmental legislation constrain the available forms of intervention. Consequently, public authorities should concentrate on producing credible security assessments, establishing transparent industrial requirements and ensuring that proposed investments are compatible with the wider European framework. The objective would be to influence investment decisions through identifiable public value rather than rely on general appeals to national strategic importance.

The 2031 net assessment: what would constitute success

By 2031, the success of the October 2026 initiative should be judged against outcomes that can be observed and verified. A credible European refining strategy would have established a documented assessment of strategic fuel requirements, identified the production and logistics capabilities necessary to meet them, and implemented legally appropriate measures where commercial markets alone do not deliver sufficient resilience. It would also have created a clearer investment environment for renewable-fuel transformation, allowing the growth of alternative production to be evaluated alongside the conventional capabilities retained or replaced. The resulting industrial system might contain fewer conventional refining installations than in 2026, but could still be more resilient if it provides greater processing flexibility, diversified feedstocks, accessible inventories and more reliable distribution. Conversely, an apparent increase in total renewable-fuel capacity would not demonstrate strategic success if the Union remained unable to obtain the required products during a major disruption.

The evaluation should therefore include both industrial and security indicators. Industrial measures would cover realised production, commissioning outcomes, capital investment, operating reliability and product-specific import dependence. Security measures would concern validated fuel requirements, accessible inventories, distribution capacity and the tested availability of alternative supply arrangements. Regulatory indicators would include the implementation of the roadmap, the durability of investment conditions and the consistency of public financing with the stated policy objectives. These indicators should be examined together because improvement in one dimension may conceal deterioration in another.

A final distinction concerns the meaning of strategic autonomy. Europe is unlikely to eliminate its dependence on international petroleum markets within the 2026–2031 horizon, and retaining domestic refining capacity does not provide complete protection from disruptions affecting crude supply or global fuel prices. Strategic autonomy should therefore be understood as the capacity to maintain essential functions under adverse conditions through a combination of domestic production, diversified sourcing, alternative fuels, inventories and resilient logistics. This is a more economically and operationally credible objective than absolute self-sufficiency, which would require assumptions about European resource availability and industrial transformation that are not supported by the present evidence.

Final Net Assessment

The European Commission’s decision of 28 October 2026 to recognise refining as a strategic asset represents an important change in institutional priorities, but its historical significance will depend on whether the resulting policy process alters industrial outcomes. The Commission has accepted the relevance of domestic refining to energy security, industrial competitiveness and defence readiness, while the participation of NATO has introduced military fuel requirements into a discussion previously dominated by commercial and environmental considerations. This recognition is consequential because it establishes a public basis for examining the security value of production capabilities whose market profitability may not fully reflect their importance during exceptional disruption.

The evidence nevertheless does not establish that Europe requires the preservation of every existing refinery, nor does it demonstrate that the Commission has already adopted the instruments necessary to retain strategically important capacity. The Union remains exposed to imported crude, international refined-product markets, infrastructure disruption and the economic conditions governing long-term refinery investment. Renewable-fuel transformation can reduce some of these exposures while introducing others associated with biological feedstocks, hydrogen, electricity and synthetic-fuel production. The appropriate industrial objective is therefore not to restore the historical structure of petroleum refining, but to preserve and develop the capabilities necessary to maintain reliable supplies of strategically important liquid fuels as the energy system changes.

The most consequential decision is whether European institutions will establish a durable relationship between operational security requirements and the industrial investment needed to satisfy them. A capability-based framework would allow governments to identify when domestic production, strategic inventories or distribution infrastructure require specific intervention, while preserving commercial discipline and the direction of the Union’s climate commitments. It would also provide a more credible basis for evaluating refinery conversions, preventing nominal capacity statistics or political declarations from substituting for evidence of actual fuel availability.

The decisive risk is that the Commission’s recognition of refining’s strategic importance remains institutionally significant but economically insufficient. Under such circumstances, refinery operators may continue to close or transform installations according to commercial incentives, while governments retain responsibility for security requirements that have not been translated into procurement, financing or infrastructure decisions. If strategically necessary capabilities disappear before alternatives become operational, the Union may face greater import dependence, reduced logistical flexibility and higher costs of rebuilding industrial capacity.

A successful European refining strategy would avoid that outcome not by preventing industrial change, but by governing it through transparent security requirements, reliable investment conditions and measurable operational outcomes. The essential policy distinction is between preserving the refinery industry as it existed and preserving the industrial capabilities Europe will continue to require. The former is neither economically necessary nor technologically realistic; the latter is a legitimate objective of European energy security, industrial policy and collective defence.

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