After "excessive" summer manoeuvres, the EU wants to cap gas prices
The European Union is working on new rules to prevent gas prices from rising to "excessive" levels, a move that might have significant repercussions for European consumers.
Tuesday, the European Commission, the EU's executive arm, proposed capping daily gas trade volumes. The objective is to prevent price spikes, which might result in higher family energy expenditures.
The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, hit historic levels in late August, when the price of natural gas increased to 341 euros ($334) per megawatt hour from approximately 45 euros per megawatt hour a year earlier.
Since then, prices have decreased as EU members have taken steps to increase their energy supply, but they remain historically high and pose a significant burden for the European economy. Tuesday, natural gas prices in Europe were approximately 120 euros per megawatt hour.
"We live in a world of high prices," a senior EU official, who did not wish to be identified because negotiations are still ongoing, told reporters on Tuesday. The same source stated that "high" summer costs "had a substantial impact on the European economy and European consumers."
However, the prospective gas trade curbs are intended to be transitory.
A second EU source told reporters that the commission desires to do something "important, but not detrimental" for the market.
According to Reuters, European Commission President Ursula von der Leyen stated earlier this month, "We should consider a price limitation in relation to the TTF in order to continue securing the supply of gas to Europe and all Member States, and to demonstrate that the EU is unwilling to pay any price for gas."
Tuesday, the commission also proposed the establishment of a new standard for the trade of liquefied natural gas (LNG).
"The TTF is tied to pipeline gas pricing, but it is inaccurate because most nations use LNG," a second official explained, adding that the goal is not to replace the current natural gas benchmark but rather to create a new one that only considers LNG.
The commission stated that this new standard should be in place by next spring, when EU members will be concentrating on increasing their gas storage levels in preparation for the winter.
Thursday, EU heads of state will convene in Brussels to consider the new measures.
According to critics, the 27 member states are taking too long to cooperatively solve the energy situation. However, proponents note that since Russia's invasion of Ukraine, the EU has made a number of significant efforts to improve its energy security.
The EU used to buy over 40% of its natural gas from Russia, but today only imports approximately 7%.
By fLEXI tEAM