Energy crisis, EU ahead against price increases

Here comes the ‘corridor’ for gas. Small steps towards shared solutions

While the European Political Community, a summit extended to 44 countries of the Old Continent, meets for the first time at Prague Castle, the EU continues, with small steps, to move towards shared solutions for contain energy pricesskyrocketed after the start of the war in Ukraine with consequences on electricity and gas bills.



Prime Minister Mario Draghi, participating in a round table on energy and climate, reiterated what he has been repeating for months, that that is, we need European solutions: “We must work together to tackle the energy crisis. We can also do it in no particular order, but we would lose European unity,” he said. Four member countries, Italy, Poland, Belgium and Greece, have put into circulation a non-paper, a document that does not represent a formal proposal and does not bind the proponents but provides useful ideas for the debate, in which it is outlined on a technical level how it could work a cap on the price of mobile and flexible gas.

The document, in essence, proposes to establish a fluctuation band for wholesale natural gas transactions, anchored to a reference value that could be linked to a basket of indicators that ‘exceed’ the Ttf, the price that is formed. on the Dutch market no longer considered representative because it is subject to wild fluctuations and too sensitive to Russian maneuvers. The price of oil, coal and gas prices charged in other markets, such as the US and Asia, are cited as possible benchmarks. In this way, by anchoring the price charged in Europe to that fixed in other markets, the risk, feared even today by Dutch Prime Minister Mark Rutte, is avoided that LNG carriers, much more mobile than the gas pipelines which are fixed by definition, may set sail. towards the Asian markets.

The main reason why Germany and the Netherlands have so far opposed any attempt to impose a price on the gas ceiling is that they fear that the supplies of liquefied natural gas, which have made it possible, albeit at a high price, to compensate for the lack of supplies from the Russia, to thin out and that the raw material is therefore lacking. So far, gas has not been lacking in Europe, despite the Kremlin’s maneuvers, because Europeans pay more for it. But precisely this willingness to pay him any amount contributed to the increases, in addition to speculation, typical of the commodities markets.

In fact, in Europe there are, broadly speaking, two groups of countries: one, now largely in the majority, who is not willing to pay any amount for gas; another, a minority but which includes Germany, willing to pay any sum, having deep pockets, to procure methane. Another who, having more limited resources, intends to put a stop to the rise in prices, which among other things has caused a wave of inflation in Europe that could soon have social and political consequences of no small importance.

As happened in the months preceding the approval of Next Generation Eu, a slow process of rapprochement is underway between the two positions, to find a workable and acceptable solution for each. Even the Netherlands, which has a precious asset for the country in the FTT, did not use closing words: while not mentioning the price cap, Prime Minister Rutte mentioned other measures that are part of the ‘panoply’ of interventions necessary to calm prices now out of control. On these measures “we could reach an agreement in the coming weeks,” said Rutte.

If the proposal launched by Commissioners Paolo Gentiloni and Thierry Breton, to create an instrument like Sure, that is a program of loans to Member States, to counter the consequences of expensive energy, received as a first response a public distancing from the Commission, which you have to navigate between two sides, in reality it has not failed at all. On the contrary. In the letter sent to the Heads of State and Government, von der Leyen explicitly states that “the Commission will look to complementary sources of funding to increase the firepower of RePower Eu”, a program that should essentially be financed by the unused Next Generation loans. Eu (some member countries have better ratings than the Commission, so they have no interest in using them).

The EU heads of state and government will discuss energy in the informal European Council. Neither conclusions nor decisions are expected, since it is moreover an informal. But, according to several observers, the climate is slowly improving, also because the line-up of countries that want to put a stop to the continuous increases in gas prices is growing and would have exceeded twenty. The Commission is working on several chapters, including a ceiling on the price of gas used to produce electricity, which would weigh on national budgets. In the non-paper it is explained that this solution has several flaws, since it ignores “two thirds of the gas market”, which also includes industry and use in buildings; creates debt without putting a cap, as the price can continue to rise, which “requires more resources to maintain the cap”; it creates a “disincentive” to lower prices, since “importers are compensated” for any price differential.

Not only. If the ceiling is “too low”, then it will create “additional demand”; if it is too high, it “will have to be accompanied by additional supports” at the retail level to maintain affordable prices. The “corridor” or fluctuation band cap, if you prefer, would avoid these disadvantages. Spanish Prime Minister Pedro Sanchez welcomed the letter from the Commission, also because, he said, he proposed the extension of the Iberian exception: the ceiling on the price of gas used to produce electricity was authorized in Spain and Portugal, as they are little interconnected to the rest of the European market and use little gas.

The alignments are therefore jagged, not monolithic. Finding 27 solutions, with 27 different energy mixes and systems, the result of individual national histories, is not easy. In addition, gas is not like anti-Covid vaccines: the commodities market is much more developed and financialized than that of drugs. Intervening with joint purchases, therefore, is much more complex. But several observers are convinced that the process now moving towards common solutions will not stop and that, in the end, the EU will reach an agreement. With its times: how long they will be, will be understood at the European Council of 20 and 21 October.



Source-www.adnkronos.com