UE COGITA TEMPORARY CEILING FOR GAS PRICES IN THE HIGH RECORD

The European Union (EU) discusses the possibility of imposing a temporary limit on natural gas prices in response to record values ​​recorded this winter (northern hemisphere).

Price increase has been driven by low temperatures and reduced renewable energy production due to lack of wind, making gas in Europe three to four times more expensive than in the United States and generating competitive disadvantages for European companies.

The European Commission studies this measure within a “clean industrial agreement”, scheduled to be presented next month. The document seeks to strengthen the EU’s heavy industries, which face challenges such as the energy transition and the US commercial policies.

According to the Financial Times, the discussions are still at the beginning, but already cause reactions from industry groups. Eleven entities, including Europex and AFME, sent a letter to the President of the European Commission, Ursula Von Der Leyen, warning of possible impacts on power market stability and supply safety.

The document states that a price limit could compromise confidence in Title Transfer Facility, the main gas trading hub in the EU, and encourage the search for price references in markets outside the block.

The proposal of a price ceiling had already been debated in 2022, when the EU reduced the purchase of energy from Russia after the start of the conflict in Ukraine, opting for US gas.

Last year, Mario Draghi, former president of the European Central Bank (ECB), suggested that the commission have powers to adopt “dynamic limits” if gas prices in EUs significantly differ from global prices, which is still under analysis.

Plans include strategies to avoid increases in gas prices during summer, when European countries stock fuel for winter. However, Member States such as Germany and the Netherlands tend to oppose a price limit.

In addition, any EU intervention can affect trade negotiations with the United States, which have been intensifying tariff measures. Analysts point out that to mitigate this situation, the EU could expand the purchase of Washington liquefied natural gas (LNG).

Amund Vik, an Eurasia Group consultant, said Europe’s priority should be to ensure energy supply for its industries and homes, and that a price limit would not resolve the issue of energy supply.

With information from Sputnik