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The European Union needs to quickly intervene in its gas and energy markets, including by imposing a price cap on wholesale gas, to avoid a spiral of deindustrialization and social unrest amid sky-high energy prices, Belgium’s Prime Minister Alexander De Croo told the Financial Times in comments published on Thursday.
The EU will look to reform the electricity market to decouple the dominant influence of gas on the price of electricity, European Commission President Ursula von der Leyen said in the middle of September.
“These are all emergency and temporary measures we are working on, including our discussions on price caps,” the Commission's president said, without referring to specific price caps on gas, or Russian gas only.
Commenting on the need to adopt measures as soon as possible, Belgium’s De Croo told FT that if the EU didn’t intervene in the gas market, “we are risking a massive deindustrialization of the European continent and the long-term consequences of that might actually be very deep.”
The energy crisis is already pushing Germany – Europe’s biggest economy – into a recession, which will deepen as we head into the winter months amid the ongoing natural gas and energy crisis. Across Europe, industries are forced to curb or shut down production due to soaring energy prices.
The prime minister of Belgium, which has been one of the EU member states calling for a gas price cap for months, said the EU could impose a hard cap on Russian gas and a flexible ceiling on LNG imports, which would still be high enough for LNG exporters to have the incentive to bring it to Europe.
The European Commission has been reluctant so far to propose a gas price cap precisely because of the concern that by limiting the price, LNG exporters will simply skip Europe and sell their cargoes to customers in Asia.
Ben van Beurden, CEO at the world’s top LNG trader, Shell, admitted as much earlier this week. A price cap on gas would make Shell’s and other traders’ efforts to bring more LNG to Europe much more difficult, he said at the Energy Intelligence Forum in London on Tuesday.
“We will do our best to bring gas to Europe where it’s needed, but if the market signal is not there it’s going to be really challenging,” said van Beurden.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.