Paris - (AFP) - The twenty-seven countries of the European Union have adopted a mechanism to set a ceiling for gas prices in the bloc, but the effects of this decision on the energy bill for companies and individuals will be limited, according to experts who fear negative repercussions on the ability of Europeans to supply gas next winter.

Gas is bought and sold on exchange platforms at a wholesale price through intermediaries and sometimes directly from industrialists.

On Wednesday, wholesale contracts for gas were exchanged over a month (ie with delivery in the following month) at 99.35 euros / megawatt hour in the euro market for the reference "TTF" index, which serves as the "gas exchange" in the Netherlands and whose prices are a reference for exchanges in Europe. In August, these prices rose to 345 euros for a short period.

The European ceiling is activated in two cases, either when this price for the monthly contract exceeds 180 euros/megawatt-hour in three consecutive days, or if it is 35 euros higher than the international price of LNG delivered by ships. The protection mechanism permission is not resorted to unless natural gas prices in the European continent exceed those of liquefied natural gas.

The roofing mechanism shall remain in operation for twenty days.

It is automatically invalidated if the price falls for three consecutive days below 180 euros or a state of emergency is declared for EU supplies.

Since the mechanism relies on a double restriction of very high prices (180 euros/megawatt-hour) that may occur only in rare cases, "the final effect is very uncertain," according to Simone Tagliapietra of the Bruegel Institute.

And in the event that tensions prevail over the global gas supply, especially in the face of increasing demand from China, “every supply problem, cold wave and insufficient decrease in European demand may lead to the availability of the conditions” necessary to activate the mechanism, according to Katia Yafimava of the Oxford Energy Institute.

However, in any case, "this ceiling aims to avoid extreme fluctuations and not to reduce energy prices in general." What is ultimately required is to avoid the record levels recorded in 2022.

Thierry Bros, an analyst specializing in oil and gas affairs, confirms that "there is no impact at all on individuals, and the impact is very small on industrialists."

He explains, "There is no necessarily direct relationship between the wholesale price and the price paid for electricity or gas... Governments intervened 18 months ago and spent 700 billion euros to limit price increases and avoid repercussions" on the consumer.

The effects of reducing the wholesale price are limited to the limited number of industrialists who buy directly from the wholesale market.

Simone Tagliapietra considers that "the main danger lies in undermining the mechanism, the possibility of securing supplies (and filling gas stocks during the year 2023). But in this case, the system is simply nullified."

The biggest risk is that consensual deals take place outside regulated markets to avoid capping, which makes exchanges "less transparent" and more risky for financial stability, according to Tagliapietra.

As for Thierry Bruce, he is more pessimistic and believes that "it will have negative repercussions, as supplies are usually guaranteed at high prices. Low prices do not guarantee anything."

In his view, the problem lies in creating a precedent for intervention in the market, and "some operators may believe that politics can now intervene at any moment."

Norway, a major supplier to the European Union, does not hide its concern in this regard. Taliapietra considers that "negotiating with them by mutual consent gives better results than setting a price ceiling."

It was recommended that "the EU decouple the price of gas from electricity, which is a means of decarbonising the system and lowering electricity prices", according to Thierry Brosse.

Simone Tagliapietra concludes, "This crisis will not be resolved unless we maximize alternative supplies of Russian gas, including renewable energy sources, and reduce demand. It is also the only way to radically reduce energy prices."