Natural gas price cap projects have hit a dead end after EU energy ministers failed to reach an agreement on Thursday amid deep divisions.
Czech Industry Minister Jozef Sikela, however, said ministers had reached agreement on other “important measures”, including joint gas purchases, supply solidarity when needed and the acceleration of the authorization process for renewable energies. Sikela also revealed that ministers will meet again in December to try to settle their differences.
Earlier this week, the European Commission published a statement in which he declared what he called a “safety ceiling price” for gas prices set at 275 euros, or $283, per megawatt hour.
The EC also planned to link European benchmark gas futures to the price of liquefied natural gas on the spot market. The “security cap price” would be triggered automatically, when “the settlement price of the front-month TTF derivative exceeds €275 for two weeks” and, secondly, when “TTF prices are €58 above the LNG benchmark price for 10 consecutive trading days over the two weeks.”
Both measures have caused concern among gas traders, “Even a short intervention would have serious, unforeseen and irreversible consequences by undermining market confidence that the value of gas is known and transparent,said the European Federation of Energy Traders this week.
Earlier this year, Italian Prime Minister Mario Draghi laid out a radical plan to contain rising oil prices. The former President of the European Central Bank launched the idea of create a “cartel” of oil consumers in a meeting with Joe Biden in order to increase their bargaining power, in the same way that the biggest oil-producing countries met through OPEC to agree on annual oil production quotas. The two men met at the White House to coordinate their positions on the Russian invasion of Ukraine and the economic fallout from the conflict.
“We are both dissatisfied with the way things are working, in terms of oil for the United States and in terms of gas for Europe. Prices have no relation to supply and demandd,” Draghi said.
According to the Brussels think tank Bruegel, since September 2021, Germany, France, Italy and Spain – four of the biggest economies in the EU – have each spent between 20 and 30 billion euros to artificially lower oil prices. energy. However, these subsidies are seen as less than ideal since they help finance Moscow, drain public finances and harm the environment.
By Alex Kimani for Oilprice.com
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