A European Union may cap natural gas prices at 275 euros to blunt the energy crisis caused by Russia’s war on Ukraine

a-european-union-may-cap-natural-gas-prices-at-275-euros-to-blunt-the-energy-crisis-caused-by-russia’s-war-on-ukraine

The European Union’s executive arm said Tuesday it’s aiming to limit European natural gas prices at €275 per megawatt hour.  If approved, the cap would be automatically triggered if two conditions related to benchmark prices are met.  Dutch TTF futures this year soared to record highs of more than €300 megawatts per hour in the wake of Russia’s invasion of Ukraine.  Loading Something is loading.

Thanks for signing up!

Access your favorite topics in a personalized feed while you’re on the go.

The European Union’s executive arm is aiming to limit European natural gas prices at €275 per megawatt hour under a proposal to defend consumers against spikes in energy costs tracing back to the war that Russia launched against Ukraine about nine months ago. 

The European Commission said in a statement the proposed “safety price ceiling” of €275/MWh ($283) would be applied to month-ahead derivatives on the Dutch Title Transfer Facility, the lead trading hub in Europe and the EU’s most commonly used benchmark for natural gas prices.

The pricing mechanism would automatically kick in when the reference price exceeds €275 for two weeks and prices run €58 higher than the LNG reference price for 10 consecutive trading days within the two weeks. Both conditions must be met for the price cap to go into effect. 

If approved by the EU’s 27 member nations, the mechanism will go into effect on January 1. EU members have been debating over proposed measures aimed at shielding customers and businesses from energy price spikes.  

Russia has drastically cut its exports of natural gas to Europe in retaliation for sanctions imposed on the country for invading Ukraine in late February, leading to a surge in electricity prices during the year. 

Dutch TTF futures this summer leapt to record highs of more than €300/MWh but have pulled back since then, to around €124/MWh. 

The European Commission said price spikes over almost two weeks in August were “highly damaging” for the regional economy, spurring contagion effects on electricity prices and an increase in overall inflation. 

“Gas prices in the EU have fallen since August thanks to demand reduction, mandatory storage filling, diversification of supplies and other measures proposed by the Commission in recent months. But we have been missing in our toolkit a way to prevent and address episodes of excessively high prices,” EU Energy Commissioner Kadri Simson said in the statement.


Leave a comment

Your email address will not be published. Required fields are marked *