Compromise reached on gas price cap

For many hours, the heads of the 27 member states met on Unorthodox Measures in the gas market severely disrupted by sanctions against Russia. Southern Europe has been asking for a price cap and joint purchasing for more than a year. But the Netherlands and Germany were sceptical about all kinds of wild interventions. They point to the large differences in the energy mix of Member States, risks to security of supply and the need to be economical with gas consumption in times of scarcity.

But last week the Netherlands and Germany – after a previous failed EU summit in Prague-suddenly made a turn to jointly enable procurement. The EU leaders quickly agreed on this point at their October meeting in Brussels. It is planned to relax European rules to make it possible for gas companies to form a kind of cartel for joint procurement. That market power should help to enforce lower purchase prices. Joint procurement remains voluntary, with the exception of filling the gas storages for the winter of 2023-2024. The member states have agreed to make this compulsory for 15% through joint purchasing.

Germany and the Netherlands continue to struggle with price ceilings, but for the sake of the sweet peace in the bloc, a ‘temporary dynamic price corridor’ can now be further worked on. How exactly this price ceiling will work and what the effect is must now be further negotiated by EU energy ministers. They will start in Luxembourg next Tuesday and are expected to reach an agreement around 18 November. If that fails, EU leaders will meet again for an energy summit.

In any case, it is going to be a compromise, because many Southern member states prefer a hard price limit for gas. The Netherlands continues to put strong pressure on preconditions.

“The gas price must continue to fall, but in such a way that the gas continues to come to Europe,” Prime Minister Mark Rutte said during a nightly meeting with the press. “It has to work and you have to be sure of that. This should not be an ideology.”

In the long term, the EU is exploring a more stable gauge of the lng price and opportunities to avoid price spikes. Many member states are dissatisfied with the functioning of the leading Amsterdam gas exchange. Prime Minister Rutte points out that the gas price has already fallen significantly and he expects that households and companies will benefit in particular from the joint purchase. “As a result, the price of gas will fall more sharply.”