EU could cap price of gas if Russia cuts energy, but there are risks

(AP Photo/Mindaugas Kulbis)
By M B
2 Min Read

In the case of a complete cut-off in Russian gas, the European Commission wants to propose a price cap on natural gas for consumers following release of a document suggesting “short-term interventions in the energy market,” according to the German Welt am Sonntag newspaper.

The proposal suggesting member states cap gas prices is intended to protect customers from an explosive rise in gas prices, although financing this intervention would entail considerable costs, the EU commission warns. The ceiling should be set so that Europe does not cease to be attractive enough for the supply of liquefied gas coming to Europe, where mainly U.S. traders take advantage of the significantly higher prices than in the Asian market.

Even before a possible acute gas shortage, EU member states should be allowed to “regulate consumer prices for a transitional period,” the document reads.

Price caps could lead to stock market failure

The German government is currently pushing back against such a step, fearing that forced price caps are likely to lead to stock market failure, as no one can be forced to bid at a specific price, an unnamed senior official in Berlin warned. However, some traders already do not consider the gas exchange to be a real stock exchange due to the over-regulation of energy in the EU. For example, Germany resells Russian gas to the Czech Republic at several times the price it buys it for.

Ukraine decided this week to stop using one of the key routes for Russian gas transit to Europe. The Russian gas company Gazprom announced that it would no longer be able to export gas to the EU via the Jamal pipeline through Poland due to Russian sanctions.

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