The Commission launches the roof, or porch, on the price of gas
The European Commission is considering a proposal to cap the price of natural gas at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, in a bid to contain the energy crisis, Bloomberg reported Wednesday, citing a document that the Commission circulated among member states on Tuesday.
The Commission could seek to establish the exact parameters under which the price cap mechanism will enter into force. According to Bloomberg , if proposed and adopted, it would be a temporary measure that could be suspended at any time if the EU believes a cap on natural gas prices decreases the flow of gas into the bloc. So a bit of a half roof, let's say more like a porch.
Representatives of EU member states are expected to discuss the proposal on Wednesday.
Last month, the European Commission presented further proposals to combat high energy prices and ensure the EU's security of supply. Those proposals, contained in a new contingency regulation, include, in the near term, “ the proposal for a price correction mechanism to establish a dynamic price limit for transactions on the TTF gas exchange and a temporary collar or band swing to prevent extreme price spikes in derivatives markets”.
The Commission also proposed to advance work on creating a new benchmark for LNG prices by March next year and to jointly purchase gas between Member States "to negotiate better prices and reduce the risk of Member States outdoing each other on the global market, while ensuring security of supply across the EU”. Therefore the parameter is only on a part of the gas, which in any case is subject to the definition of an international price.
The EU has not rushed to propose plans to cap the price of natural gas since the start of the Russian invasion of Ukraine and the resulting sharp reduction in gas supplies in Russian pipelines to the EU, lest a price cap could put Europe at a disadvantage in competing for supply offers on international markets.
Thanks to our Telegram channel you can stay updated on the publication of new articles from Economic Scenarios.
The article The Commission launches the roof, or porch, on the price of gas comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-commissione-vara-il-tetto-o-il-portichetto-sul-prezzo-del-gas/ on Wed, 16 Nov 2022 18:02:26 +0000.