While the man on the street thinks that the “Price Cap” imposed by the EU on the gas price will reduce prices, “it is a further example of how people are being cheated by politics,” Italian economist Michele Geraci tweeted. “The Price Cap on gas, fixed at the highest value between €180 and the price of other markets (for instance LNG) plus €35, is just the maximum price for trading on the TTF. OTC transactions instead, will have no limit.”
Even the EU regulator has cast doubts on the Price Cap, the Financial Times reported.
“The EU’s energy regulator has warned that the bloc’s new gas price cap was unlikely to lower costs for consumers or businesses if countries kept on rushing to fill their depleted reserves, calling the mechanism agreed by ministers this week ‘unprecedented, untested.’ Christian Zinglersen, director of the EU’s joint energy agency Acer, said he would be ‘reluctant to rely on this gas price cap’ alone to prevent the types of price spikes that roiled Europe’s energy markets in the summer following Russia’s invasion of Ukraine.”
Apparently, those who pushed the Price Cap (former Italian Prime Minister Mario Draghi is credited with the original idea) not only do not know economics, they do not even know history.
The first historically recorded price cap was introduced by Roman Emperor Diocletian in 301 AD. It was imposed on a broad category of goods in the attempt to control inflation which had been generated by money printing and made the situation worse.
Even the ever unreliable Wikipedia reports: “The edict did not solve the problem, as the total mass of coins minted continued to increase inflation and the maximum prices that were set were apparently too low. Merchants either stopped producing the goods, sold them illegally on the black market (which proliferated in those years), or used the barter system instead. The edict as a result prompted the cessation of business and trade, either between merchants or in whole cities, which were no longer able to produce the goods at acceptable costs. Since the edict also had set limits on wages, those who had fixed wages (particularly soldiers) found that their wages had increased but were no longer valuable because artificial prices did not reflect real costs. Thus a real paralysis of the economy in the empire was produced.” (https://it.wikipedia.org/wiki/Editto_sui_prezzi_massimi)
Incidentally, Diocletian also attempted to implement a Final Solution for Christians. The EU has more than one similarity with him.
