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4 EU Countries Propose ‘Dynamic’ Gas Price Corridor

Four European Union member states are seeking to temper soaring energy prices and inflation with what they are calling a “dynamic” gas price corridor–a proposal released on Wednesday and expected to be discussed by EU country leaders today and tomorrow in Prague. 

The initial draft proposal for a dynamic gas price corridor was drawn up by Poland, Italy, Belgium and Greece and would be applied to all wholesale natural gas transactions “not limited to import from specific jurisdictions and not limited to specific use of natural gas”, Reuters reports, citing the draft document. 

The price corridor would be set in a range lower than market prices. The idea behind the proposal is to set prices high enough to maintain normal market operations, yet introduce a dynamic element that would make it possible to remain competitive for new supply. In other words, if deemed urgent, the “dynamic” nature of the price corridor would give EU leaders the flexibility to green light natural gas transactions that are above the existing price settings. 

"It should act as a circuit breaker and disincentive to speculation. It is not meant to suppress prices at an artificially low level," Reuters cited the document as saying. 

The dynamic gas price corridor proposal comes as the European Union considers a gas price cap plan that has yet to be formalized.

Europe is also working on the creation of an alternative natural gas benchmark price to the Dutch Title Transfer Facility (TTF) benchmark. 

While more than a dozen EU countries are pushing for some sort of natural gas price cap, Germany and the Netherlands are against the idea, expressing concern that such a move could hamper efforts at securing enough natural gas for the winter heating season. 

More than 40 European leaders began gathering in Prague on Thursday for the first “European Political Community” meeting, which will include Ukraine in a new club configuration that leaves Russia out of the picture. European leaders will be discussing the economy, the energy crisis and other pressing issues. 

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on October 06 2022 said:
    The proposed gas price corridor is no more than a disguised way of capping the price of natural gas and is doomed to fail like the capping of Russian oil crude exports.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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