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European Commission wants dynamic price ceiling for gas

High energy prices are causing difficulties across Europe

By: N. Peter Kramer - Posted: Wednesday, October 19, 2022

"The EU summit at the end of this week is the moment of the truth!"
"The EU summit at the end of this week is the moment of the truth!"

N. Peter Kramer’s Weekly Column

High energy prices are causing difficulties across Europe. More and more countries have to take measures to protect their citizens and businesses. A call for concrete measures to tackle high gas prices on the wholesale market has been heard for months. But not all EU member states are in favour of such a general price ceiling. For instance Germany, the Netherlands and Denmark are not convinced of the necessity of it.

In the beginning of this week, the European Commission presented its long-awaited legislative proposals to tackle high gas prices. Pending the formation of a new benchmark index for the price of liquified natural gas (LNG), it wants to enable a temporary, dynamic price ceiling to avoid excessive prices and extreme price fluctuations in Europe’s largest gas market, the Dutch TTF (Title Transfer Facility) market

The TTF market works no longer properly, according to Commission President Ursula von der Leyen, blaming Russia’s manipulation of gas supplies to Europe. Putin’s answer on the EU economic sanctions against his country. The Commission wants to create an additional reference index for LNG. It will not be ready until April next year, so too late for the coming winter. Therefore, in anticipation of the new index, there should be a market correction mechanism that puts a stop to extreme prices on the TTF market. That mechanism would be activated in case of emergency and would set a temporary dynamic price ceiling for the short-term trading of LNG. As usual in EU deliberations, what exactly should be regarded as excessive prices is still not determined.

The EU summit at the end of this week is the moment of the truth!

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