Next round: EU energy ministers discuss European gas price cap

This Thursday, the EU ministers responsible for energy will have a special meeting in Brussels to decide on further measures to combat high energy prices. They will also discuss for the first time a concrete proposal from the EU Commission to cap the price for gas sold on the TTF trading platform under certain circumstances.

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That should cause heated discussions. Italy, Greece, Belgium and Poland in particular are pushing for a gas price cap, but Germany, the Netherlands and some other countries fear supply security bottlenecks. Other moves to jointly buy gas and speed up approvals for solar and other renewable energy are less controversial. It is expected that ministers can agree on these two initiatives – then they could go into effect. The outcome of the meeting is still unclear in view of the gas price cap dispute.

Gas price cap for emergencies

The EU Commission is proposing to curb particularly severe price swings in European wholesale through a price cap. This affects certain transactions at the wholesale center TTF, to which many supply contracts in the EU are linked. Unlike the federal government’s gas price brake, the cap applies to major customers who shop at the TTF and not to end consumers.

In concrete terms, the cap would apply automatically if the price for gas to be delivered in the following month exceeded 275 euros per megawatt hour for two weeks and at the same time was at least 58 euros higher than the reference price for liquefied natural gas (LNG) on the world market. Orders above the price limit would then no longer be accepted. However, the price limit has already been criticized for being so high and the conditions so strict that it is unlikely to be used. Therefore, the cap should not go far enough for supporters like Italy, but too far for opponents like Germany.

Joint gas purchases

The concentrated market power of the EU should ensure lower gas prices. The EU Commission proposes filling the gas storage facilities in a coordinated manner in the coming year. This should also prevent states from outbidding each other and driving up prices. In this way, companies should bundle part of their demand centrally, for which joint offers can then be obtained. The companies could then decide whether to form one or more consortia to buy the gas together.

Fast track procedure for solar systems

In order to replace Russian gas, solar systems and other renewable energy projects are to be approved in a rush procedure. The EU Commission proposes that solar systems must be approved within a maximum of one month and heat pumps within three months. Projects with renewable energies would be considered by the law to be in “overriding public interest”. Wind farms, for example, would thus be exempt from certain environmental protection rules and would be more difficult to challenge in court. The rules are to apply for a year until long-term legislative changes in the area have been negotiated.

Scholz expects agreement on price caps for Russian oil to be reached soon

Chancellor Olaf Scholz has expressed optimism that the EU can agree on a price cap for Russian oil.

“I am very confident that we will soon be able to do this together,” Scholz said in Berlin on Wednesday evening, referring to ongoing negotiations in Brussels. It is about finding a solution that hits Russia without having too many disadvantages for the EU countries. In the G7 framework, too, there is talk of an oil price brake, which the USA, for example, is pushing for. However, what is controversial is not only what will happen if not all purchasing countries participate. So far, no agreement has been reached on the level of the price cap for Russian oil. A diplomat familiar with the negotiations said a cap of between $65 and $70 per barrel of oil is being considered within the G7 framework.

“Poland, Lithuania and Estonia consider the price too high because they want to align it with production costs, while Cyprus, Greece and Malta consider it too low because there is a risk that their ships will be unloaded even more, which could mean that the G7 has found a good middle ground,” said an EU diplomat.

About 70 to 85 percent of Russia’s crude oil exports are carried by tanker ships rather than pipelines. The idea of ​​the price cap is to ban shipping, insurance and reinsurance companies from handling Russian crude oil shipments around the globe – unless the oil is sold at a price no higher than the maximum set by the G7 and its allies . Since the world’s major shipping and insurance companies are based in the G7 countries, the price cap would make it very difficult for Moscow to sell its oil – its biggest export, which accounts for about 10 percent of global supply – at a higher price the consideration.

However, with Russian production costs estimated at around $20 per barrel, the price cap would still make selling Russian oil profitable, thereby preventing a supply shortage on the world market.

Cyprus President Nikos Anastasiadis warned of distortion of competition after the talks with Scholz. Alluding to neighboring Turkey, he said that a price cap must also apply to states that want to become a member of the EU or are members of NATO. It cannot be the case that these states would solicit investments from Russia while other countries were deciding on sanctions against Russia. The background is the still relatively good relations between Turkey and Russia. Anastasiadis said with regard to the earlier high level of Russian investments in Cyprus, that these had already declined significantly since the financial crisis. The EU country can therefore implement the EU sanctions against Moscow without any problems.

BRUSSELS (dpa-AFX) / Berlin/Brussels (Reuters)

More news about the price of natural gas – Natural Gas

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