European leaders should put a cap on soaring gas prices, Bank of America’s head of commodities research said Thursday on Bloomberg. Francisco Blanch said European industrial firms are can’t operate effectively with gas-linked electricity costing 1,000 euros per megawatt hour. The European Commission is reportedly looking at ways to cap energy prices. Loading Something is loading.
European leaders should put a limit on soaring natural gas prices as a severe jump in related electricity costs hurts industrial activity in the region, Francisco Blanch, head of commodities and derivatives research at Bank of America, said Thursday on Bloomberg TV.
Following Russia’s invasion of Ukraine, European natural gas prices have flown up 1,000% higher than a year ago. The European Commission, the executive arm of the European Union, is exploring ways to cap energy prices and measures to reduce demand, Reuters reported Thursday. The EU itself this week said it wants to artificially sever the link between natural gas and electricity prices.
“A move to 100 euros a megawatt hour — most European industrials cannot operate, right? So when you’re at 1,000 euros a megawatt hour, this has passed beyond the point of demand destruction,” Blanch said in a televised interview.
The astounding surge represents a “clear market failure” that should encourage governments to take action, he said.
With natural gas a key source of power generation, benchmark electricity prices this week broke above 1,000 euros per megawatt-hour for the first time on record.
Energy prices have surged as Russia has squeezed gas flows to Europe after Moscow was hit by war-related sanctions and the EU pledged to cut its reliance on Russian energy. In the latest move, Russia’s Gazprom on Wednesday shut down the Nord Stream 1 gas pipeline for maintenance, stoking concern about future supplies.
“I do think that the consequences of not tackling the current shortage of gas in Europe could be devastating to both consumers and industry over the course of the next six months,” Blanch said. “Remember, you’re probably destroying about 5% of European gas and power demand every month with this kind of price level that we’re seeing here.”
Germany’s Economy Minister Robert Habeck said Thursday that Russia cannot be relied on for energy purposes. “We should not count on gas coming via the Nord Stream 1 pipeline over the winter,” he told reporters.
News of the EU’s exploration to arrest soaring energy prices sent European benchmark power prices tumbling Thursday. The price was more than halved to 486 euros per megawatt hour. The price, however, remains about 10 times the average for this time of year, Bloomberg data show. Natural gas prices also pulled back Thursday.
Deal icon An icon in the shape of a lightning bolt. Keep reading
More: MI Exclusive Natural Gas Commodities Electricity prices Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.