Brussels, 20 December 2022
Gas price cap at €180/MWh. EU energy ministers reached a political agreement on a Council Regulation that sets a market correction mechanism to protect citizens and the economy against excessively high prices. The Regulation aims to limit episodes of excessive gas prices in the EU that do not reflect world market prices, while ensuring security of energy supply and the stability of financial markets. The EU can suspend the mechanism as soon as there is a risk of supplies that seriously endanger the countries’ economies. Hungary voted against and Austria and Netherlands abstained. Putin reacts.
✔ The Political point
The found agreement was very difficult, because the starting positions were very distant.
First of all, whether it should concern only gas from Russian or on all gas. 15 countries asked that it be applied to all imported gas and won. The Regulation covers all imported gas.
Furthermore, the Eastern EU countries were asking for a lower limit, around €80/MWh, in order to hit Russia hard. But they had to give in, otherwise Germany and France would veto them.
Other important discussions concerned the possibility of placing a limit on the price of LNG, which was later excluded, and of keeping the differential between gas and LNG lower, but realism prevailed over the desire to impose very harsh conditions on Russia.
Strong reaction from Putin. In the meantime the price dropped to €110/MWh.
However, the risk could arrive if the gas demand increases too much during this winter or during the summer season to fill the reserves, like it happened last summer with a price growth.