As geopolitical tensions trigger disruptions in global oil and gas markets, Europe’s vulnerability to energy price shocks is once again in focus.

European countries remain highly dependent on imported energy, leaving their economies and financial stability exposed to global price swings.

AIB reproduced an interesting graph in its latest economic analysis this week which tagged a country’s fiscal space to its energy import dependency.

The ideal place to be on the four-quadrant grid is the bottom left-hand corner which indicates good fiscal headroom (net debt as a percentage of GDP) and a low reliance on energy imports. Countries inhabiting this position include Estonia, Sweden, Latvia and Finland.

The worst position to find yourself in is the top right-hand corner which indicates poor fiscal space combined with high reliance on energy imports, a double bind in the current geopolitical climate. Countries in this position include Italy, Belgium, Spain, Portugal and the UK.

Ireland resides in the bottom right-hand corner, which indicates that while it remains highly reliant on energy imports, it has good fiscal headroom (courtesy of record tax receipts).

[ Irish inflation rises to 3.7% on back of energy price shockOpens in new window ]

While the Irish economy has – to a limited extent – weaned itself off fossil fuels, AIB says it remains highly exposed to price shocks, “with a renewed focus on decarbonisation required alongside short-term energy supports”.

AIB chief economist David McNamara says renewables account for about 16 per cent of Ireland’s energy output compared to an average of 25 per cent across Europe.

His report cites recent Eurostat figures indicating Irish electricity prices are among the highest in Europe for both households and business users.

“Therefore, the economy is already in a relatively uncompetitive position versus European peers,” it says.

All of which re-enforces the point that Ireland has been inordinately slow (in European terms) in pivoting to renewables and has become dangerously reliant on supernormal tax receipts.