Noticeable relief? – The EU gas price cap now aims to avert price wars

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After lengthy negotiations, EU energy ministers have agreed on a gas price cap. If the import of gas into the EU is certain and the price rises above 180 euros per megawatt hour, the EU can intervene to regulate the market. However, this does not solve all the problems – and the question is whether the end consumer will feel anything from the price controls in the worst case.

Since the second half of 2021, energy prices in the EU and globally had skyrocketed. The gas price reached its previous high of 340 euros per megawatt hour on August 26 at the relevant EU wholesale trade center TTF on the Dutch stock exchange, last Monday it was 110 euros per megawatt hour.

Filled reservoirs provide relaxation on the market
According to experts, one reason for the relaxation in the gas market is the well-stocked storage facilities in the EU, while the price was only around 40 euros a year ago. Experts think it’s possible that after a harsh winter, when states have to fill their storage facilities in the spring and demand picks up, the price of gas could rise back above $200.

Now the EU wants to intervene in the market if the price exceeds 180 euros per megawatt hour. According to an initial draft, however, the price cap only applies to gas that is traded a month in advance, so that providers can push prices up again later.

Price cap can be revoked at any time
To avoid supply bottlenecks, the EU Commission believes that the price cap should also be monitored regularly and can be withdrawn at any time. Gas could also continue to be traded outside exchange platforms such as the TTF, this exception to OTC (over the counter) trading is intended to give the EU additional flexibility.

What does it mean for the end customer?
The project mainly affects large clients trading on TTF – not end users. However, consumer prices are indirectly influenced by wholesale prices, which could also lead to a reduction in gas prices for end users.

Operator threatens to move trading platform
But even with the agreement of the ministers, not all problems have been solved – also because, among other things, the operator of the affected trading platform TTF threatened to move the trading platform, which is now located in the Netherlands, to other EU countries. Nations. All options must now be examined up to the question of whether an effective market in the Netherlands is still viable, according to operator Intercontinental Exchange (ICE).

Germany, among others, has long resisted such a mechanism. The country feared that security of supply would be jeopardized because suppliers could sell their gas on Asian markets, for example, where they could negotiate higher prices. According to three EU representatives, Germany voted in favor of the compromise proposal, Austria abstained.

Austria had abstained
Austria abstained from this vote. “I am convinced that in the future it can help to prevent absurd excesses in gas prices. At the same time, however, an extension to other gas exchanges in addition to TTF has been included in the scheme today at the last minute. And this expansion can also have an impact on security of supply. This applies in particular to Austria. Even as we take major steps away from our dependence on Russia, we still need these supplies at this time,” Energy Minister Leonore Gewessler (Greens) said in a statement following the decision.

Source: Krone

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