Europe's soaring energy costs push leaders to consider major steps

With the days turning shorter, Europe is facing a dire energy crisis that is increasingly testing political leaders and the public.

Why it matters: The ability of European countries to keep the lights and heat on this winter depends on how this crisis is managed.

• A failure to secure adequate energy supplies could lead to political unrest and economic turmoil.

The big picture: The narrative has shifted from a threatening situation requiring urgent action to near certain peril that could cause the EU to dive into the depths of a recession, with worldwide knock-on effects.

Threat level: Energy prices continue to spike to record levels nearly every day, as Russia throttles back its shipments of natural gas to the EU in retaliation for Ukraine-related sanctions.

• Last week, the U.K.'s energy regulator announced an 80% hike to the price cap that gas suppliers can charge customers, with another increase to come in January.
• Price spikes could threaten lives this winter, as people have to choose between food and heat.
• According to Reuters, the benchmark European gas price has jumped by at least 550% in the past year.

What's next: European Union energy ministers are likely to hold an emergency meeting in the coming days.

• Some leaders, such as the prime minister of the Czech Republic, are seeking an EU-wide solution.
• Ursula von der Leyen, head of the European Commission, signaled her support for reforming the bloc's electricity markets on Monday.
• "The skyrocketing electricity prices are now exposing the limitations of our current market design," von der Leyen said via Twitter this morning.
• "We are now working on an emergency intervention and a structural reform of the electricity market."

Catch up fast: The EU's 27 member states agreed in July to voluntarily cut gas consumption by 15% through March 2023.

• Under that agreement, there is an option to impose mandatory gas consumption cuts.

Yes, but: Such measures may be difficult, given the diverse energy mix of countries within the bloc.

• Also, it is clear that countries like Germany are rushing to fill their natural gas reserves for the cold season. But Europe will still need considerable imports — this time in the form of liquified natural gas — to get through the winter.

Between the lines: The situation in the U.K. illustrates the political pressures on leaders to act.

• After last week's price hikes, a debate is raging over whether to cut taxes to reduce costs on residents, make direct payments to help people withstand the price spikes, or both.

What we're watching: With energy markets blinking red, the actions taken in the next few weeks will help determine how Europe fares this winter, and how high citizens' bills will climb.