The European Union agrees on a gas price cap
Gas prices would be capped from 180 euros/MWh in the European Union, according to the agreement reached by the Twenty-Seven (Illustrative image).
© ERIC PIERMONT / AFP
Text by: RFI Follow
3 mins
The 27 member countries of the European Union reached an agreement on a natural gas price cap, Monday, December 19, 2022. EU member states on Monday approved a mechanism to cap wholesale gas prices from 180 euros/MWh.
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Faced with Russia, the European Union (EU) managed, on Monday 19 December, to maintain a united front on the energy issue.
The Member States have reached an agreement on the gas price cap, reports our correspondent in Brussels,
Pierre Benazet
.
This is to protect European consumers against soaring world prices, due to the war in Ukraine.
The negotiation was painful between the 27, but after several meetings, they managed to agree on a somewhat complicated mechanism.
It will only be activated at a price level above the average international price of liquefied natural gas (LNG) so as not to endanger Europe's gas supplies, a diplomatic source said.
“
A strong signal sent to the market
”
European energy ministers, meeting in Brussels, "
have reached an important agreement that will protect citizens from soaring energy prices, with a realistic and effective mechanism, which includes the necessary guarantees for the security of supply and stability of financial markets,
" said Czech Minister Jozef Sikela, whose country holds the rotating EU presidency.
"It's a strong signal sent to the market
," said Bertrand Candelon, professor at the Louvain School of Management.
“
If Belgium doesn't want to buy at that price, the producer will simply say
'she doesn't want it, I don't give it to her'.
.
Europe is nevertheless a big applicant, there is a negotiating power, a financial surface, which is more important.
»
The ministers of the 27 had already agreed on December 13 on certain terms of the mechanism, which will apply to futures contracts on the gas markets, but they still had to agree on the price at which the cap will be applied. will trigger.
The European Commission had initially proposed to cap monthly contracts on the TTF reference market once they exceeded 275 euros/MWh for two consecutive weeks, among other conditions – factors never met, even at the height of the price surge. in August.
The TTF, a Dutch platform, is the
de facto
gas exchange of the EU and its price serves as the benchmark for the majority of gas transactions on the continent.
A hard-to-find deal
After tearing each other apart over this proposal, the Member States finally agreed on a much lower threshold, which will have to be reached during a significantly reduced period.
The contract for delivery in one month was traded Monday on the TTF around 110 euros/MWh.
Several States (Spain, Poland, Greece, Italy, etc.) had called for a clear relaxation of the conditions for activating the mechanism.
On the contrary, reluctant to intervene, other states such as Germany and the Netherlands initially rejected the very idea of a cap, fearing that it would scare off suppliers.
In reaction, Russia described Monday as “
unacceptable
” this cap on the wholesale price of gas.
"
It's a violation of the market process for price formation
," Kremlin spokesman Dmitry Peskov was quoted as saying by Russian news agencies.
►Also read: Energy crisis: between sobriety and the search for gas, Europeans in search of solutions
(
And with AFP
)
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