Because Italy, France, Spain and Poland are degassing the gas price cap

Because Italy, France, Spain and Poland are degassing the gas price cap

Ministers Pichetto Fratin and Urso criticized the Commission's proposal on the gas price cap: high threshold and too complex mechanism. For Spain it is "a joke", while Germany (opposed to the cap) approves of it. All the details

“Fifteen countries agree not to adhere to the European Commission's proposal on the price cap ”. These are the words of the Minister of the Environment and Energy Security Gilberto Pichetto Fratin, who went to Brussels to participate in the meeting of the Energy Ministers of the twenty-seven member states of the Union.

The summit did not produce an agreement, and ministers will meet again on December 13 to try to resolve the stalemate.

CRITICISM OF THE COMMISSION'S PRICE CAP

One of the main topics of discussion at the meeting was precisely the price cap (or price cap ) of natural gas proposed in recent days by the Commission and much criticized by analysts due to its functioning, which makes it practically impossible to activate.

The mechanism is not liked by the states in favor of the price cap – i.e. the fifteen to which Pichetto Fratin referred: Italy, France, Spain and Poland are part of the group – also due to the threshold value chosen, 275 euros per megawatt hour, considered very high: they expected a ceiling of around 150-180 €/MWh.

WHAT PICKETTO FRATIN SAID

Interviewed by Sky TG24, Pichetto Fratin said that "we do not consider the Commission's price cap proposal sufficient" because it "risks stimulating speculation instead of curbing it". Financial speculation on the TTF market is often indicated – also by Pichetto Fratin's predecessor, Roberto Cingolani – as the cause of the gas price crisis, which however is mainly linked to the imbalance between supply (scarce) and demand.

Pichetto Fratin added that "there is a strong commitment to guarantee a replacement of Russian gas for storage for next autumn and winter", which mainly passes through the import of liquefied gas (LNG).

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URSO'S WORDS AGAINST THE PRICE CAP

Even Adolfo Urso, Minister of Enterprise and Made in Italy, used harsh words against the Commission's price cap mechanism: "six months have gone by with a war in the heart of Europe based on the Russian energy war against the Europe”, he said, “and after six months the European mountain gives birth to this little mouse”.

In fact, the cap developed by the Commission is activated only if two conditions are simultaneously met: if the futures prices (contracts for the exchange of gas at a future date) on the TTF exceed 275 €/MWh; and if the difference between the threshold value of the ceiling and international LNG prices exceeds 55 euros for ten consecutive days. This is a de facto inapplicable price cap .

THE CRITICISM OF SPAIN AND POLAND

The president of the Spanish government, Pedro Sánchez, thinks that the Brussels price cap is "clearly insufficient" and that it could "have perverse effects, not of a reduction but of an increase in gas prices". Madrid also called it "a joke".

For Polish Prime Minister Mateusz Morawiecki, the conditions for activating the mechanism are "a cause for concern"; for France they are extreme.

WHAT GERMANY THINKS

Germany, on the other hand – opposed to a gas price ceiling, fearing consumption incentives and supply difficulties – likes the Commission's proposal, probably because it is almost inapplicable and therefore in fact non-existent.

Sven Giegold, state secretary in Germany's economy ministry, said the mechanism requires some minor tweaks, but was good overall.

WHAT THE NETHERLANDS THINK

The Netherlands are also, like Germany, against the price cap but with even more rigid positions. According to the Dutch climate minister, Rob Jetten, the Commission's mechanism could be harmful for fuel supplies (sellers could focus on more profitable markets than Europe, such as Asia) and for the stability of financial markets (in Bassi, in Amsterdam, is the TTF, which serves as a reference for the continent).

THE OTHER PROPOSALS OF THE EU ENERGY PACKAGE

In addition to the gas price ceiling, at today's summit the ministers of the twenty-seven member countries discussed two other Community proposals on energy.

One is the establishment of a new (and temporary) mechanism to limit the intraday volatility of electricity and gas derivatives. The other in the creation of a European platform for the coordination of national gas storage filling plans; companies from individual states could form a European consortium to increase their bargaining power and obtain better prices from suppliers.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/price-cap-gas-opposizione-italia-francia-spagna-polonia/ on Thu, 24 Nov 2022 14:01:16 +0000.