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EU to extend emergency gas price cap for another year

by Jessica Weisman-Pitts
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2023 12 19T131356Z 1 LYNXMPEJBI0I5 RTROPTP 4 GLOBAL ENERGY

EU to extend emergency gas price cap for another year

By Kate Abnett

BRUSSELS (Reuters) – The European Union is set to extend its emergency cap on gas prices for another 12 months to serve as a safeguard against possible energy price shocks, after energy ministers backed the plan on Tuesday.

The EU first agreed the gas price limit in December 2022, after months of cripplingly high energy prices caused by Russia slashing gas supplies to Europe after its invasion of Ukraine.

Europe’s energy security situation is more comfortable today than during last winter – energy prices are far lower, countries have secured new sources of non-Russian gas, and gas storage is near-full.

“Despite the relatively good start of the winter, the geopolitical situation remains very fragile. And these emergency measures help us to shield our consumers against excessive energy prices,” EU Energy Commissioner Kadri Simson said.

The price cap had been due to expire in February 2024 and will now apply until the end of January 2025. The agreement by ministers on Tuesday needs to be adopted in writing, but that step is usually a formality.

EU countries agreed to extend two other energy crisis measures for 12 months. One offers faster permits for renewable energy projects to help countries replace Russian gas with clean power, and the other sets rules to ensure countries share gas during a shortage.

Czech industry minister Jozef Síkela said the EU‘s response to last year’s energy crisis had eliminated “(Russian President Vladimir) Putin’s possibility to blackmail us”, referring to Russia’s ability to cause gas price spikes by reducing supplies to Europe.

Russia’s gas deliveries to Europe have plunged since its February 2022 invasion of Ukraine. Before then, Moscow had been the EU‘s top gas supplier.

Russian energy giant Gazprom has piped 27 billion cubic metres of gas to Europe this year, a sharp drop from the 180bcm it sent in 2018 when deliveries were at their peak, Reuters calculations showed.

The EU‘s gas price cap has never kicked in. It is designed to apply if European gas prices exceed 180 euros per megawatt hour – a level the benchmark EU gas price has not reached since the depths of Europe’s energy crisis.

Prices then had peaked at above 300 eur/MWh on the front-month Dutch TTF gas contract in August 2022. The contract was trading at around 34 eur/MWh on Tuesday.

 

(Reporting by Kate Abnett, editing by Ed Osmond)