EU Countries Talk Price Caps On Gas

The European Commission has warned EU countries that a broad cap on gas prices could be complex to launch and pose risks to energy security, amid calls from countries for Brussels to step in to tame high fuel prices.

The Commission shared a document with countries on Wednesday, analysing various options the EU could consider to curb high gas prices, after 15 of the bloc’s 27 member states this week urged the EU to propose a cap on gas prices.

The document, seen by Reuters, said launching a wholesale price cap for all exchange transactions – covering both liquefied natural gas and pipeline supplies – could compromise cross border flows of gas between EU countries.

Related: Companies Urge Spain, Portugal Not To Act Alone On Power Prices

In a supply shortage, multiple countries might hit the gas price cap, meaning price signals would no longer help drive flows to regions where demand is high or supply scarce, the Commission said. It suggested such a price cap could therefore only work if a new entity was launched to allocate and ship scarce fuel supplies between different countries.

If the EU capped gas prices, it would also need to find “significant financial resources” to ensure countries could keep attracting gas supplies from competitive global markets where other buyers may be willing to pay prices above the EU cap, the Commission said. It did not specify where such resources could come from.

“The risk of triggering supply disruptions from third-countries supplies is higher for a generalised wholesale price cap than it is for a price cap on the imports of pipeline gas,” the document added.

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