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Thursday, December 1, 2022

The European Commission puts caps on gas prices

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The device launched this Tuesday is proposed limit, from January 1, the prices of monthly contracts (for delivery the following month) in the Dutch gas market TTFused as reference for the transactions of the operators in the EU.

The mechanism would take effect automatically when:

  • The settlement price of the TTF derivative of the previous month exceeds 275 euros for two weeks, or
  • TTF prices are 58 euros higher than the LNG reference price for 10 consecutive business days within two weeks.
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Since then, transactions over 275 euros would no longer be authorized (about 283 dollars). The mechanism would be deactivated as soon as those conditions were no longer met.

Nevertheless, monthly contracts only exceeded 275 euros this year for a very short period, at the end of August, with a peak around the 350 eurowhen EU countries competed to fill their reserves.

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Though Ministers will assess the proposal this week in Brussels, further negotiations with governments will be needed before an approval is reached formal. Germany does not hide its concern about the effects that the plan may have on European reserves.

“A tool was missing for this type of situation. They are not market interventions to set prices at artificially low levels, but a mechanism of last resort to prevent episodes of excessive prices,” declared the Energy Commissioner, Kadri Simson.

Europe It faces a scenario of almost certain recession due to the energy crisis that impacts its production, while energy prices for citizens add pressure on inflation and the cost of living.

Source: Ambito

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