What is Brussels studying (and how it lags) on the gas package
The European Commission will present a package of measures next week to contain the impact of the energy crisis. Meanwhile, gas prices are rising by 25% and there are discussions about establishing strategic reserves. All the details
Today, Wednesday 6 October, European natural gas contracts for the month of November increased by 25 per cent to 155 euros per megawatt hour. Six months ago, for comparison, the price was just 18 euros.
WHAT IS HAPPENING
Today's surge is part of a wider crisis in energy prices (not just natural gas) that has been going on for several weeks and that affects, in different ways, the whole world. In addition to gas , the costs of coal are also growing (the repercussions are serious especially in China ) and oil, which on Monday reached 81.2 dollars a barrel and could reach 90 by the end of the year.
The energy crisis is serious not only because the cold season in the Northern Hemisphere is nearing its beginning – gas and coal are used to generate electricity or to heat homes – but also because high energy prices risk aggravating the inflation and jeopardizing the economic recovery from the pandemic.
WHAT THE ENERGY COMMISSIONER SAID
The Commissioner for Energy of the European Union, Kadri Simson, was also convinced of this. The increase in energy prices, he argues , “is harming our citizens and in particular the most vulnerable families, undermining competitiveness and increasing inflationary pressure. If left unchecked, it risks jeopardizing Europe's recovery while it is gaining momentum ”.
The European Union needs to stockpile natural gas to prepare for the cold months, but it is having difficulty replenishing its stocks as high fuel prices discourage purchases. The bloc is particularly exposed to this crisis because – unlike the United States, which can rely on domestic production – it imports about 90 percent of the gas it consumes.
The increase in the cost of raw materials is consequently driving up electricity and gas bills .
Commissioner Simson then called on member state governments to "provide targeted support to consumers, direct payments to those most at risk of energy poverty, cut energy taxes, shift burdens into general taxation": this is he said of "measures that can be taken very quickly according to EU rules".
"The immediate priority should be to mitigate social impacts and protect vulnerable families," he added; companies, on the other hand, can see the burden of price increases reduced “through state aid or by facilitating long-term energy purchase agreements”.
THE EUROPEAN "INSTRUMENTARY"
The European Commission, however, does not present until next week its "toolbox" (toolbox) of short and medium term measures suggested to member countries to mitigate the impact of rising energy prices without violating market rules common.
LONG-TERM MEASURES
In the long term, the European Union is discussing the possibility of establishing a strategic gas reserve, to be used in situations of need. At the moment, gas stocks across Europe are above 75 percent: a value below the average of the last ten years, but – according to Simson – sufficient to meet the demand in the winter season.
Furthermore, the President of the European Commission Ursula von der Leyen said that Brussels is considering proceeding with a "decoupling" of the prices of natural gas from those of electricity: today they are linked, because a large part of European electricity is produced precisely starting from gas; but in the future, with the spread of renewable sources, things could change.
WHAT DRAGHI SAID
Prime Minister Mario Draghi said he considered the proposal to establish a strategic natural gas reserve "very positive" because it would allow European states to "not be caught unprepared for peaks in energy that not only have consequences on the economy, but also on distribution, on inequality ".
"The increase in energy prices that we are experiencing in Italy is everyone's problem," said Draghi during a press conference during the European summit in Slovenia. “Apart from the determination to continue the strategy of mitigating the social costs of these price reliability”, he added, “we need to think about a structural measure. We are reflecting on this aspect ”.
THE ATTACK ON RUSSIA
Recalling Europe's heavy dependence on gas imports, von der Leyen said that although demand for this fuel is increasing, supply is not keeping pace. “We are very grateful that Norway is increasing its production, but this does not seem to be the case with Russia”, the main supplier to the Old Continent.
Simson recalled that Russia is indeed complying with long-term supply contracts, but has not booked new export capacity despite rising prices (which could benefit economically).
Russian President Vladimir Putin has overturned the charges, arguing that the European Union and its energy policies are to blame for the price crisis, not Russia. Rather than relying on the spot market, that is, the one that provides for an immediate gas purchase, Moscow – and the state-owned energy company Gazprom – would prefer Europe to sign long-term supply contracts.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/unione-europea-crisi-prezzi-gas-pacchetto-misure/ on Wed, 06 Oct 2021 14:33:52 +0000.