EU Fails To Agree Gas Price Cap

89
Source:
KWON JUNHO/unsplash

EU energy ministers have failed to agree a cap on gas prices to mitigate the energy crunch in Europe amid deep divisions over an initial proposal slammed by many as a joke”, says an article published on RTE. 

Bridge differences

The ministers will now meet in the first half of December to try to bridge differences, said Czech Industry Minister Jozef Sikela, whose country holds the current presidency of the EU.

Hastening authorisation

He added that the ministers did manage to adopt a couple of other “important measures”, including joint gas purchases to avoid intra-EU competition driving up prices, supply solidarity in times of need, and hastening authorisation of renewable energy sources.

Price cap proposal

Several ministers going into meeting complained that the gas price cap proposal on the table, unveiled by the European Commission just two days earlier, was clearly designed to never be used.

The Polish and Spanish energy ministers called the proposal a “joke”.

Valuable time

Greek Energy Minister Kostas Skrekas said the cap “is not actually a ceiling” on gas prices, and “we are losing valuable time without results”.

The price cap plan – which the commission was never keen on – sets a maximum threshold of €275 per megawatt hour.

Historic prices

But it comes with so many conditions attached that it would not even have been activated back in August, when the gas price briefly soared above €300, alarming Europe used to historic prices around 10% of that.

Two-week period

The cap proposal would only be triggered if the €275 limit was breached continuously for at least two weeks, and then only if the price for liquified natural gas (LNG) rose above €58 for ten days within that same two-week period.

The price of wholesale gas in Europe  was around €124, according to the main TTF benchmark.

Lucrative markets

The commission’s proposed price cap was seen as neutered under pressure from members including Germany and the Netherlands, which feared a cap could divert gas supplies to more lucrative markets, especially Asia.

Workable ceiling

Yet at least 15 EU countries – more than half the bloc – want some form of workable ceiling on wholesale gas prices to tackle a crunch in supply forced by Russia’s war in Ukraine.

While the European Union has not banned Russian gas, the Kremlin has been turning off the taps in retaliation for sanctions imposed by Brussels in the wake of Moscow’s invasion.

Imported gas

Before the war, Russian gas supplies accounted for more than 40% of all imported gas into the European Union, with export powerhouse Germany particularly needy.

That has now dropped to less than 10%.

Alternative sources

But alternative sources – such as LNG shipped from the United States and the Gulf – cannot make up the shortfall, and Europe faces a pricey heating bill for winter.

Next meeting

EU energy commissioner Kadri Simson acknowledged the divisions over the price cap as she went into the meeting.

She noted that the ministers have “a right to calibrate the different parameters” if they wished – something that may happen in time for their next meeting, likely to be called for 13 December.

Voluntary initiative

The price cap plan, if adopted, would start in January. It would run alongside a voluntary initiative for EU member states to cut natural gas use by 15% over the northern hemisphere winter.

Did you subscribe to our newsletter?

It’s free! Click here to subscribe!

Source: RTE

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.