The proposal of a dynamic cap could be a right solution for the different needs of the market, said the EU’s Economy Commissioner, Paolo Gentiloni, in a speech on Radio Anch’io on Radio1. A general gas price cap could have contraindications, Gentiloni added, specifying that the attitude towards Russia cannot be the same as towards Norway or Algeria and for this reason a dynamic price cap can meet this need. Gentiloni believes positions among EU member states are converging and hopes the Commission can come up with a proposal ahead of the EU leaders’ summit scheduled for October 20-21.
So is the dynamic gas price cap
The proposal, put forward by Italy, Poland, Greece and Belgium, initially envisages a scenario where there is no shortage of supplies and there is an exchange of gas supply and demand, explains Ansa, who read the non-paper. In this regard, it is proposed to create a dynamic corridor, where it is possible to set a central value for this corridor and update it regularly, taking into account external benchmarks (e.g. crude oil prices) and taking into account fluctuations (e.g. from 5%) around the mean within the corridor. Basically, it is about providing a minimum and a maximum price in order to reduce costs without jeopardizing the supply. The maximum limit can be placed on a reference hub (e.g. Ttf) or on several hubs (Peg, Psv, Zee to avoid arbitrage) or better on all transactions (both on-exchange and OTC). ), explains the document. The problem is convincing Germany that it has so far rejected the idea of the roof.
The roof on the gas used for electricity
The European Commission, on the other hand, has proposed setting a price cap only for the gas used to generate electricity, with a view to reforming the electricity market. Hypothesis that Italy, Poland, Greece and Belgium do not like, which the document underlines how a limited cap on gas used for electricity ignores 2/3 of the gas market and acts as a disincentive to lower prices as importers be compensated for whatever price you pay. This solution, the four countries warn, could create external liability without a clear limit because, for example, the import price can continue to rise and more resources are needed to maintain the cap. The fear that the weight of this intervention will become unsustainable for national budgets.
The hypothesis to replace the ttf
Among the topics discussed is the hypothesis to replace the Ttf in Amsterdam with an alternative index that better reflects the European energy reality. The TTF has worked in the past, but it’s time to have a more truthful European index. There is no justification for the 8-10x increase in the price of gasoline, we pay so much for it because someone is afraid that it will be missing in the future. Everything is evolving, even the market, the rules must be changed, said the Minister of Ecological Transition, Roberto Cingolani, in recent days. For obvious reasons, this prospect does not sit well with the Netherlands.
Negotiations with allied suppliers and joint purchases
Rather than a general cap as suggested by Italy, Brussels prefers to focus on negotiations with suppliers deemed reliable, such as the United States and Norway (which has become the first methane supplier in the European Union, ed.) Imported to bring down gas prices, both methane and LNG. On Thursday October 6, the European Commission announced that it had signed a memorandum of understanding with Norway to commit to jointly developing tools to stabilize energy markets and limit the effects of market manipulation and price volatility. in order to significantly reduce excessively high prices in the short and long term. The question of mandatory joint purchases via the European energy platform is also on the table of the heads of state and government of the EU. We must work together to tackle the energy crisis. We can also do it in no particular order, but we would lose European unity, Prime Minister Mario Draghi warned. A message that seems to be aimed primarily at Berlin, which has decided to go it alone with the $200 billion super plan for the time being and continues to reject the price cap hypothesis. There is also the possibility of strengthening RePowerEu with new funds, which could require the creation of a new common instrument. An unwelcome scenario for the so-called frugal, Holland at the top, but also for Germany, which rejected Commissioners Breton and Gentiloni’s proposal to resort to a new shared debt to deal with the energy crisis along the lines of what was done during the crisis became the pandemic with Sure.
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