Written by 4:52 pm Europe Economy

EU agrees to jointly buy gas — but divided on price caps

Whether the EU will act directly to limit gas prices in order to reduce soaring bills for households and business is still an open question — as there is still no consensus on gas-price caps.

“We need to have swift but also effective solutions. This is not an easy subject,” the Czech Republic’s industry minister Jozef Síkela, whose country holds the EU council presidency, said on Wednesday (12 October), after hosting an informal energy meeting in Prague.

Although no breakthrough was made in talks over price caps, EU countries reached a general agreement to purchase gas through a joint platform before next summer, Sikela said.

Energy ministers discussed different options to curb high prices in a bid to guide the European Commission in the design of emergency measures due to be presented next week (18 October).

The commission’s proposal will be ready in time for the summit meeting of EU leaders in Brussels on 20 and 21 October — where energy issues and their impact on Europe’s economy will be high on the agenda.

Among the priorities of the proposal will be: joint purchases of gas, to avoid EU countries outbidding each other in global markets ahead of next winter, ensuring solidarity agreements among member states, further energy-savings targets, and developing a complementary benchmark for gas prices.

“We must tackle the prices now,” EU commissioner energy Kadri Simson said during a press conference along Síkela.

“The commission’s preference [to lower prices] has been to do it via negotiations with our international partners. But we have to be ready if these negotiations aren’t quick enough,” Simson said.

The EU needs to be ready to apply a temporary mechanism to limit the prices if negotiations do not deliver in time, she added. The upcoming proposal is expected to explain how this would work in practice.

Non-EU Norway, which stepped in as a major EU gas supplier as it cut supplies from Russia, opposes price caps for gas.

“We think the solution is to build on the commercial framework,” said the country’s energy minister, Terje Aasland, who joined EU ministers in Prague said on Wednesday.

Negotiations with suppliers in Norway and the US to reduce the prices of imported gas are seen by many EU countries as a measure which could lower prices while preserving supply.

“That’s a logical first step that needs to be done,” Austrian energy minister Leonore Gewessler said, ahead of the meeting with her counterparts.

German-Dutch proposal

Until now, some countries have pushed for a broad price cap on gas — while others see this as a risky move that could undermine security of supply, or inadvertently increase consumption.

Nevertheless, it is still unclear whether the proposal of the commission will include some sort of proposal for price caps.

“Our proposal on 18 October will consist of the kinds of proposals where we have maximum consensual support,” said Simson — falling short to clarify whether there is enough support to put forward this type of measure.

According to the Polish environment minister Adam Guibourgé-Czetwertyński, a group of 17 countries is currently in favour of a wholesale gas price cap for both imports and intra-EU gas transactions. The list includes Belgium, France, Poland, Portugal, Slovenia, Greece, Italy and Spain.

But Germany, the Netherlands and Hungary are still wary of any price cap.

“We agree on the diagnosis. The therapy is still under discussion,” said the Italian minister for ecological transition Roberto Cingolani ahead of the meeting.

On Tuesday (11 October), Berlin and Amsterdam put forward a 10-point proposal presenting emergency measures to tackle the energy crisis. But both countries voiced scepticism about the idea of capping gas prices.

“Measures in the electricity sector which might increase the gas demand and targeting the same infra-marginal rents should be considered very carefully and also should include burden-sharing,” reads their document.

‘Confusing’ debate

“The debate on the cap is a confused one, because there are different caps different people talk about,” said German minister for climate action Sven Giegold, referring to the differences in market dynamics regarding imports of liquified natural gas (LNG) and gas that comes via pipelines.

For LNG, a globally-traded commodity, Germany and others argue that a price cap would be detrimental as suppliers could turn to regions without price caps to sell their gas. For gas via pipelines, they argue caps risk undermining market signals to consume less and could potentially trigger an uptick in consumption.

Hungary, for its part, is concerned that Russia will completely cut gas supplies if a price cap is introduced.

“Russia has made it very clear that in case of an introduction of the price cap on gas, they would cut the gas deliveries … so it’s obvious that we will not support [this measure],” Hungarian minister for foreign affairs Péter Szijjártó said on Wednesday, ahead of the informal energy council in Prague.

Detailed and in-depth discussions over the commission proposal will take place later this month (25 October) among energy ministers, who are expected to adopt the commission proposal in early November during an extraordinary council meeting.

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