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ECONOMY

Wed 15 Mar 2023 9:41 pm - Jerusalem Time

Brussels seeks to change the rules of the gas market in order to reduce prices

Strasbourg (France) (AFP) - Under pressure from European Union member states worried about the approach of winter, the European Commission on Tuesday presented details of its proposals aimed at controlling energy prices by dealing with price instability in the gas market.


Faced with deep divisions among the bloc's 27 countries over the idea of a price cap, Brussels is introducing measures "subject to maximum unanimity", as the Commission emphasized.


The proposals, which will be unveiled in Strasbourg, will be reviewed Thursday and Friday by heads of state and government at a summit meeting in Brussels before their possible adoption in November.


On Tuesday, the Commission will introduce a reform of the gas market index "TTF", which European operators consider a benchmark for transactions and which, according to it, is fueled by speculation "artificially".


The idea is to replace it within six months with an alternative index that is more representative of real supplies.


Until then, Brussels recommends a "temporary mechanism" to correct gas prices. According to a European source, it would be a "dynamic corridor" (a flexible range in which prices are allowed to fluctuate) to frame transactions in the TTF market, making it possible to mitigate volatility and avoid any sharp rise.


On the other hand, Brussels wants to force member states to agree to joint purchases of gas at the level of the European Union for the next season to fill stocks in order to obtain better prices from "reliable" suppliers (Norway and the United States...) and to prevent the bloc countries from rivalry.


European Union member states gave the go-ahead in March to launch a joint procurement platform, but no deal was concluded through it and countries continued to negotiate unilaterally.


Now, the Commission wants to involve the private sector more through a consortium of importing companies.


The Commission will also propose an enhanced solidarity framework for countries at risk of supply shortages, and additional tools to reduce gas consumption: in the face of different efforts between countries, Germany and the Netherlands have called for "more ambitious and binding targets".


The European economy is suffering badly from Russia cutting its supplies of hydrocarbons, on which the bloc relies heavily.


But the European Union is facing great difficulty in finding a common response, with diverging interests between countries, such as France, which bets on nuclear energy, or Germany, which depends on coal, or countries linked to Russian hydrocarbons in Central Europe.


"The prices are insane: we agree on the diagnosis, but we are still discussing the appropriate treatment," Roberto Chengolani, Italy's Minister of Environmental Transition, summed it up on Wednesday.


In this context, the Commission should not propose capping the price of gas that electricity suppliers buy for their thermal plants, according to the previously mentioned European source.


This system, applied in Portugal and Spain, allows electricity prices to drop automatically.


France supports the idea of expanding it to include the rest of the European Union and has pledged to persuade other member states to adopt it. However, this mechanism raises the mistrust of countries such as Germany and the Netherlands, which reject state intervention in the markets and fear the risks of increasing demand for gas due to the increased appetite of electricity suppliers.


But at their meeting, the 27 countries may agree to "explore" the measure, according to draft conclusions seen by AFP.


On the other hand, it seems that the idea of capping gas import prices, which was mentioned by the Commission in early November and then demanded by 15 member states, including France, has become forgotten.


It is an idea that Berlin has opposed, fearing it could exacerbate tensions in LNG supplies in a tight global market.


During a meeting in Prague in early November, European leaders expressed their concerns about the economic and social consequences of inflation.


"If we don't find a solution, people will end up on the streets, a weak economy, bankruptcy, less popular support for climate policies and aid for Ukraine. This winter will be decisive," Czech Industry Minister Josef Sekela said last week.

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Brussels seeks to change the rules of the gas market in order to reduce prices

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