The European Commission intends to propose a natural gas price cap after November 24, as part of its efforts to contain an energy crisis caused by Russia’s invasion of Ukraine, the EU’s energy policy chief told Reuters on Wednesday.

The European Union’s 27 member states have been debating whether to cap gas prices for months, as the bloc struggles to contain soaring inflation and energy prices caused by Russia’s reduction of gas supplies to Europe.

According to EU energy commissioner Kadri Simson, the Commission, which drafts EU policies, will propose a cap following a meeting of EU energy ministers on Nov. 24, where they are expected to instruct the bloc’s executive to move forward with the proposal.

“We will move swiftly and we will make a legal proposal immediately after ministers will mandate us to do so,” Simson said in an interview on the sidelines of the COP27 climate summit in Egypt.

“We have done our homework. I think that this kind of price cap can allow us to calm the market… it also removes the risk that we will not receive cargoes at all,” she said.

The EU countries are divided on whether to cap gas prices. Once proposed by the Commission, the measure would require the approval of a reinforced majority of at least 15 countries.

Belgium, Poland, Italy, and Greece have demanded that Brussels propose a gas price cap by November 24 or face blocking other EU policies such as faster renewable energy permitting rules.

Others, including Germany, Europe’s largest gas user, warn that price caps will make it difficult for countries to secure cargoes in international gas markets.

The planned gas price cap, outlined by the Commission in a document shared with EU countries late Tuesday, would kick in if prices reached a predetermined level, and would cap the price of front-month contract trades on the Dutch title transfer facility gas trading hub.

“We don’t want to suspend the market as such,” Simson said. “In a global commodity market, we cannot attract these volumes unless our (gas) prices are competitive against the other world regions, namely the Asian market.”

The document, seen by Reuters, did not specify the price level it would use, but stated that it would be suspended immediately if it caused “unintended market disturbances” that jeopardized Europe’s energy security.

(Adapted from Reuters.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability