Capping gas prices in the EU, an impossible equation

Several months after the start of the energy crisis, the question remains: can the European Union really be able to curb the rise in gas prices, which remain anomalously high, or can it only consider palliative measures? Certain Member States, convinced that action should be taken, are obliged anyway to propose to the Commission whatever market control mechanisms they deem necessary to correct prices. However, no ambitious agreement has yet been reached from the talks, which resemble a dialogue of the deaf.

The latest finding of the Brussels executive presented on Tuesday proves this. Indeed, at the request of Spain and especially France, the Commission proposed to limit the Title Transfer Facility (TTF), the main virtual center where shippers and customers negotiate gas supplies on the Old Continent. But this tool will only be activated if the price in the TTF exceeds 275 euros per megawatt hour (MWh) for two consecutive weeks, which is almost impossible to achieve. ” Even when Putin threatened to cut gas exports to Europe, he didn’t stay that way for long! », emphasizes Phuc-Vinh Nguyen, a researcher at the Energy Center of the Jacques Delors Institute. Unsurprisingly, the news has angered several states, once again frustrated by Brussels’ reluctance.

Obsession with supply security

It should be noted that the Commission has to deal with conflicting directives: on the one hand, several states are asking it to set a clear and effective limit on gas purchase prices in order to calm unreasonable growth in the markets. On the other hand, the institution wants to avoid robbing gas suppliers by setting prices at all costs. artificial down “, at a time when this fuel is in danger of running out in Europe – it must do without a large part of Russian hydrocarbons. The result is an impossible equation, summarized by the President of the European Commission himself: ” ceiling [du TTF] it must be flexible enough to ensure security of supply and high enough for the market to function “, he noted a month ago.

In fact, the temptation of Brussels ” minimize risk Regarding possible gas shortages in Europe, instead of trying to lower the price, Energy Commissioner Kadri Simson reiterated on Thursday. Already very flexible, the ceiling can be suspended by the Commission at any time, even if already almost impossible conditions are met.” when there is a risk to security of supply “, he clarified. And to add ” the idea is to continue attracting LNG supplies [gaz naturel liquéfié, ndlr] To replace lost volumes from Russia ».

EU split over gas prices

Supply prevails in the market

And for good reason, as the European Union, which produces little gas on its own soil, is increasingly dependent on LNG shipped in from around the world for supplies. However, in this globalized and highly competitive market, There is a big risk that suppliers will send their cargo elsewhere, for example to Asia, for a better price, rather than complying with the EU-imposed cap. », believes Xavier Pinon, the founder of the energy broker Selectra.

“It is always very difficult for a buyer who is able to demand gas and even faces the risk of shortage to explain to his suppliers that he will not pay more than a certain ceiling. As long as the market is dominated by supply, producers will face the risk of turning to other potential buyers”, – notes Jacques Persebois, economist and director of the Research Center for Energy Economics and Law (CREDEN).

This phenomenon is already happening: the Old Continent’s rush to LNG to break away from Russian hydrocarbons has upset the international market and sent cargo prices soaring. So much so that several countries that depend on it to generate electricity, including Pakistan, are unable to chain and overcome power outages.

Under these circumstances, and with the global supply of LNG not sufficient to meet everyone’s demand – at least for several years – the room for maneuver to negotiate the price should remain very limited. So the only solution without regret A supply shock that rocked Europe would massively reduce demand. ” There is no other way to quickly reduce the pressure in the system “The connoisseur of the sector says. While any gas price cap, on the other hand, risks stimulating consumption of this hydrocarbon or distracting suppliers, the Commission prefers to hold it in place, despite outrage from Spain, Greece, Poland and even France over the caution.

Europe is completely legally replenishing its gas reserves thanks to Russian LNG