EU Delivers Nat Gas Price Cap Without “NSilver Bullet”

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LNGNatural Gas · 23 November, 2022

EU Delivers Nat Gas Price Cap Without “NSilver Bullet”

The European Union has unveiled a long-awaited natural gas price cap plan to protect consumers from soaring energy prices in the wake of Russia’s invasion of Ukraine, capping prices for the entire bloc at 275 euros (~$272) per megawatt hour, Reuters reports.

Commodity

LNG, Natural Gas,

Writer

IPG Staff2

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·      The European Commission unveiled a long-awaited price cap plan for natural gas on Tuesday.

·      The price cap proposal is for month-ahead derivatives on the Dutch natural gas benchmark TTF and would be in place for two weeks.

·      EU Energy Commissioner Kadri Simson: “This is not a silver bullet that will bring gas prices down,”.

 

The price cap proposal is for month-ahead derivatives on the Dutch natural gas benchmark TTF and would be in place for two weeks.

 

The plan is being presented as a failsafe that would not be set in motion unless natural gas prices reached above specific levels for 10 straight days during that two-week period, the Wall Street Journal said, citing the European Commission.

 

“This is not a silver bullet that will bring gas prices down,” WSJ quoted EU Energy Commissioner Kadri Simson as saying. “But it provides a powerful tool that we can use when we need it.”

 

Last week, EU officials warned that once a gas price cap was initiated, it would be “immediately” revoked in the event that there were any negative economic consequences for the bloc, Euronews reported.

 

That statement reflected mounting fears that a market intervention of this nature would result in the diversion of cargoes of liquefied natural gas (LNG) to Asia.

 

The potential for LNG cargoes to be diverted was illustrated in recent reports about rising numbers of LNG vessels waiting on the coast of Europe for prices to rise before offloading.

 

"We have put a lot of thought into what can go wrong. If something goes wrong, we will pull the plug," Euronews cited a senior EU official, speaking on the condition of anonymity. "We will push the button."

 

The European Commission's price cap proposal, unveiled Tuesday by the European Union, still requires the approval of all member countries in order to be implemented. Further discussions will take place on Thursday, according to WSJ.

 

By Charles Kennedy for Oilprice.com / 22 Nov, 2022, 12:00 PM CST