EU leaders set to explore gas price cap options

BRUSSELS: European Union leaders meeting at the end of this week will explore a range of options for capping gas prices, on which they have been divided for weeks, according to new draft conclusions for the summit of 20 and October 21 as seen by Reuters.

The 27 EU countries have been deadlocked for weeks over whether and how to cap gas prices as part of efforts to rein in soaring energy prices, as Europe is heading for a winter of Russian gas scarcity, a cost of living crisis and a possible recession.

Gas prices have soared as Russia cut flows to Europe after its invasion of Ukraine and Western sanctions imposed on it – prompting most EU countries to call for a cap gas prices, although they disagree on its design. Some countries, including Germany, Europe’s largest gas market, remain opposed. They argue that price caps could lead to increased demand for gas or leave countries struggling to attract supply from world markets. The bloc’s executive, the European Commission, is due to propose energy measures to deal with the crisis on Tuesday, ahead of the leaders’ meeting.

Several pro-gas cap countries fear the Commission will present the options they have proposed, an EU diplomat has said. “Impatience is growing with member states,” they said. “So we shifted gears and put whatever was floating…on the table.” It is a way of putting pressure on the Commission to make the most concrete proposals possible.

The latest draft conclusions showed leaders would agree to “explore a temporary dynamic price corridor” for natural gas until another EU gas price benchmark is in place.

Belgium, Greece, Italy and Poland want a price corridor for wholesale transactions, which would mean a price range with a central value below the market price.

The draft said the leaders would also “explore a temporary EU framework to cap the price of gas in power generation at a level that helps lower power prices without… leading to an overall increase of gas consumption.

Diplomats say a consensus could emerge on capping the price of gas used for power generation, known as the ‘Iberian model’ after a scheme put in place by Spain and Portugal in June, although that some fear will increase EU gas demand. The diplomat said that exploring several options in the draft summit conclusions did not mean that any or all of them would necessarily be accepted.

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