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« BackNews: Europe Considers Further Moves To Cap Gas Prices

Europe Considers Further Moves To Cap Gas Prices

The European Union has been considering further measures to help ease the burden of higher gas prices over the winter, after drawing up an initial package of measures.

A meeting of the European Commission led to proposals to introduce emergency regulations that would enable joint buying across the EU to take place. This would enable bulk buying at lower prices and allow countries to co-operate in a supply-side emergency.

Another proposal is for a different price benchmark for liquefied natural gas (LNG). Should this be cheaper, countries may seek to increase their storage capacity for it to help get through the next few months.

Should such a proposal go through, it may have knock-on effects for the wider gas price. More supply-side stability could bring prices down, which might also help non-EU countries like Britain by lowering the general market cost of gas. Although the UK uses some imported LNG, it also gets half of its supply from the North Sea while also importing gas from Norway.

However, as yet there is no agreement on the table for an EU-wide energy cap, although the majority of member states want it. A popular idea, known as the Iberian Mechanism after it was introduced in Spain and Portugal, would see a cap on the price of gas used in power stations to generate electricity.

This idea is not universally popular, as both Germany and the Netherlands have claimed it would make it harder for the EU to obtain gas when competing with other countries on world markets.

Longer-term plans to deal with issues of supply shortages and their impact on price may also be high on the agenda in other countries, not least the UK.

The new chancellor Jeremy Hunt has said the government will not maintain its previous plan to limit average household energy bills to £2,500 a year beyond April, with a “targeted” support package set to be drawn up to help those most in need.

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