Varo Energy CEO Links Rising European Defense Spending to Increased Fuel Demand

Rising defense spending across Europe is creating new demand for refined fuels, according to Dev Sanyal, the chief executive of Varo Energy. The comments highlight a significant shift in government focus toward energy security and supply resilience in a market that has seen its production capacity shrink over the past decade.

A Shift in Government Priorities

Sanyal noted a distinct change in his conversations with European governments, contrasting the current climate with the period between 2015 and 2022 when the focus was on closing refineries. "Every conversation I’m having with European governments today is all about how do you maintain resilience, how do you maintain continuity of supply?" he told Reuters.

This renewed emphasis on a stable energy supply is driven not only by security concerns but also by industrial ambitions, Sanyal added. He cited Europe's push for a competitive advantage in artificial intelligence as another factor contributing to the growing need for reliable energy.

Surging Military Budgets

This increased demand for fuel is backstopped by concrete financial commitments from governments. According to European Council data, defense spending by European Union member states has risen sharply:

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• It reached €418 billion ($472 billion) in 2025.
• This marked the 11th consecutive annual increase.
• The figure represents a 75% rise since 2021, with further growth anticipated.

Context: A Contracting Refining Sector

The surge in demand comes as Europe's refining capacity has significantly contracted. A report from the trade group FuelsEurope showed that since 2009, 30 of the approximately 100 refineries operating in the region have been closed or converted, with at least seven becoming biorefineries.

This long-term reduction in capacity has tightened the supply of essential transportation fuels like diesel, gasoline, and jet fuel. For investors and market watchers, the combination of resurgent demand from the defense sector and a constrained supply landscape could provide support for European refining margins.