Page 6 - FSUOGM Week 40 2022

FSUOGM COMMENTARY FSUOGM

EU members still fail to make headway

on gas price cap proposal

EU member states are still undecided about what form the price cap should take.

EU EU leaders convened once more on October 7 6 that a gas price cap could result in mandatory
to discuss the introduction of a price cap on gas rationing of supplies.
WHAT: imports, but once more, member states failed to “The gas price is currently being set by the
EU leaders met again on decide on what form the measure would take. demand side, not the supply side,” the federation
October 7 to discuss a Ahead of the summit, a majority of EU said in a statement. “Prices rise to a level where
gas price cap. countries asked the European Commission to consumers self-interrupt, switch to alternative
propose the gas prices. The energy ministers of fuels, or invest in other energy-saving measures.”
WHY: 15 nations – Belgium, Croatia, France, Greece, “Without market-based prices, consumption
Disagreement continues Italy, Latvia, Lithuania, Malta, Poland, Portugal, will rise and governments will have to step in to
about what form the gas Romania, Slovakia, Slovenia and Spain – penned force reductions. And contracted and future
price cap should take. a letter to Brussels pledging support for the gas deliveries into the bloc would be put at risk,”
move. But the Commission itself has reserva- EFET added.
WHAT NEXT: tions about the price, fearing it could make the “LNG contracts in many cases take place
Another meeting is European gas market even more tight, as some outside EU jurisdiction (and indeed, sellers may
scheduled later this suppliers will have an incentive to divert their insist that future contracts take place in interna-
month. shipments to other markets that offer higher tional waters,” the federation said. “An importer
prices, particularly in Asia. could redirect cargoes outside Europe rather
Germany, Denmark and the Netherlands than trade at a loss against a lower cap. The con-
have likewise warned that the cap would make it sequence would be a risk to security of supply.”
difficult to buy gas on the global market. While The government in Berlin has suggested that
Norway, which sends the overwhelming major- governments step in to subsidise the wholesale
ity of its gas to Europe via pipeline, would have gas, which would limit costs for households and
nowhere else to sell the volumes, LNG suppliers industry, while ensuring suppliers still had an
such as Qatar and the US could easily find other incentive to send gas to Europe. But this would
destinations for their gas. Russia, meanwhile, has come at a great expense to government coffers,
warned before that it would cut off the remaining at a time when many are contending with sig-
supply to Europe if a cap were imposed. nificant debt loads as a result of the pandemic
The European Federation of Energy Traders and the fallout from the Ukraine-Russia conflict.
(EFET) is also concerned, warning on October Meanwhile four countries – Poland, Greece,

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