Reality might have overtaken the much-ballyhooed Western “price cap” to be imposed upon Russian oil. The draft of the European Commission on Europe’s energy crisis, which Bloomberg News today says its editors have seen, says: “This is the moment to act, for this winter and beyond…. The current situation causes economic and social hardship, placing a heavy burden on citizens and on the economy. Rising energy costs are leading to reduced purchasing power for citizens and loss of competitiveness for companies.” Not exactly the prelude for more blarney about forcing Russia to sell their oil below market price to the West.
The package will reportedly offer ways for EU countries to use state aid to deal with the impact of high energy costs on companies and households, in a volume of up to €40 billion from the bloc’s cohesion funds. Member nations will also be offered a common purchase platform which would coordinate the filling of gas reserves, avoiding a dogfight over precious supplies. Energy firms could form a European consortium to negotiate long-term contracts — something Russia’s Gazprom, along with President Vladimir Putin, has been pushing all along. And the ridiculous prices from the speculators at the Dutch TTF trading hub? Well, only “as a last resort,” but there could be price limits put on their transactions.
Reuters reported something similar on this last point, saying that the draft included “potential interventions in the Dutch Title Transfer Facility (TTF) price that is widely used in Europe for contracts and hedging.” They added the assurances that the “measures should not … affect the orderly functioning of energy derivative markets.” There’s a long way between such talk and such EU action, but even such talk has not made it to the surface in quite a while.
Reuters also reported that the “proposal is far short of the EU-wide gas price cap 15 EU countries have called for, but opposed by others such as Germany, Austria and the Netherlands, that argue caps could lead to a gas shortage and fail to incentivise energy saving.” Reuters quotes Georg Zachman, an energy expert at the Bruegel think tank: “As a result of falling gas prices, this proposal shows that the appetite for ambitious reform, such as a price cap, is fading.”
EU energy ministers are said to be presently working out the details for the EU summit discussions on October 20/21.
