Cap On Soaring Gas Prices Divides European Leaders Before Summit
The two-day summit is scheduled to start on Oct. 20 in Brussels, with talks likely to stretch late into the night
(Bloomberg) -- A deal on capping gas prices in the European Union remains elusive as national leaders prepare for next week’s summit to discuss ways of containing an unprecedented energy crunch that’s fueling inflation and threatening to push the bloc into a recession.
The controversial idea of imposing a limit on soaring gas prices continues to divide member states, whose energy sources and economic strength vary across the 27-nation bloc, according to an EU official with knowledge of the matter.
Proponents of a cap differ on its potential scope and design, while opponents are concerned about endangering the security of supply after Russia cut shipments to the region following the invasion of Ukraine.
To rein in the crisis, EU leaders are likely to endorse a set of steps to strengthen the bloc’s resilience and better use its leverage in negotiating gas contracts, according to the official, who asked not to be identified commenting on private talks. Those actions include bolstering the EU mechanism for common gas purchases and establishing a new index for liquefied natural gas after the current benchmark failed to reflect the region’s energy reality.
The two-day summit is scheduled to start on Oct. 20 in Brussels, with talks likely to stretch late into the night. It will follow a proposal by the European Commission, the bloc’s executive arm, of a set of measures to tackle gas prices on Oct. 18. The leaders will give a political guidance on the package, which will then need to be approved -- and possibly amended -- by ministers to take effect.
Price Cap
The commission signaled earlier this week it would weigh whether to put forward legislation next week that would temporarily cap the price of gas used for electricity generation. Such a narrow cap, which could be modeled on a mechanism already introduced in Spain and Portugal, is still contested by some member states. Political statements by EU leaders would need unanimous approval.
While a one-fit-all solution to curb gas prices is impossible to implement in the EU, there’s a growing realization that the bloc needs a set of measures to alleviate the impact of the crisis on companies and consumers reeling from high bills. Policy makers are hoping that their plans will already have an impact on the volatile market, similar to where a pledge by G7 to work on capping Russian oil prices pushed down the cost of crude.
To win lower prices in negotiations with alternative suppliers, EU leaders may also endorse the strengthening of its platform for joint purchases and voluntary involvement of private companies in the talks, the official said. They may support mandatory participation of energy companies in purchases for filling gas storage before the next heating season.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.