Thursday, April 18, 2024

EU sets gas cap

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European Union (EU) nations have agreed to cap soaring wholesale gas prices to protect consumers across the bloc.

From February 15, prices will be limited if they breach 180 euros per megawatt hour for three days running.

It follows weeks of wrangling in which Germany and others sought safeguards to ensure the cap would be suspended if it had negative consequences.

Gas prices have spiked as EU countries seek ways to import less Russian gas following its invasion of Ukraine.

Previously Moscow supplied 40 per cent of the gas used across the bloc, but those flows have fallen sharply putting pressure on market prices.

Jozef Skiela, the Czech minister of industry and trade said the EU had “succeeded in finding an important agreement that will shield citizens from skyrocketing energy prices”.

“Once again, we have proved that the EU is united and will not let anybody use energy as a weapon.”

In a statement, Kremlin spokesman Dimitri Peskov called the cap “unacceptable” and said it was an attack on market pricing.

The cap comes after Europe’s benchmark price for natural gas delivered via pipeline briefly surged to nearly 340 euros per megawatt hour this summer – more than three times what it is now.

It is temporary and will last for a year, the European Council said.

Once the cap is activated, gas across the bloc will have to be sold at a level equivalent to or below the global price of liquified natural gas (LNG), plus 35 euros.

This will last for at least 20 working days, the Council said, although the cap could be automatically deactivated if prices fell again.

The measure has been months in the making, with EU governments starkly divided on how to implement it.

Some countries such as France and Spain wanted to urgently bring in a limit to protect consumers.

But others including Germany, Austria and Denmark were concerned the measure would scare off suppliers of liquified natural gas (LNG) from the Middle East and elsewhere.

In the end the sceptics backed the 180-euro cap, which was much lower than a 275-euro limit initially proposed by the European Commission.

The cap will include a suspension mechanism that would kick in if energy supplies came under threat or demand began to surge.

Poland’s Prime Minister Mateusz Morawiecki hailed the agreement on Twitter on Monday.

“At the recent meetings in Brussels, our majority coalition managed to break the resistance – mainly from Germany,” he wrote. “This means the end of market manipulation by Russia and its [main supplier] Gazprom.” (BBC)

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