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The EU’s Latest Plan For A Natural Gas Price Cap

The European Commission is weighing a proposal to set a price cap for natural gas at the Title Transfer Facility (TTF) hub in the Netherlands, the European benchmark, in a bid to contain the energy crisis, Bloomberg reported on Wednesday, citing a document the Commission had circulated among member states on Tuesday.

The Commission could be looking to set exact parameters under which the mechanism for the price cap would enter into force. This, if proposed and adopted, would only be a temporary measure and could be suspended at any time if the EU sees that a price cap on natural gas prices would diminish the flow of gas into the bloc, according to Bloomberg.

Representatives of the EU member states are expected to discuss the proposal on Wednesday.

Last month, the European Commission unveiled additional proposals to fight the high energy prices and ensure the security of supply for the EU. Those proposals in a new emergency regulation include, in the short term, “proposing a price correction mechanism to establish a dynamic price limit for transactions on the TTF gas exchange, and a temporary collar or bandwith to prevent extreme price spikes in derivatives markets.”

The Commission also proposed advancing work to create a new LNG pricing benchmark by March next year, and joint gas purchasing among member states “to negotiate better prices and reduce the risk of Member States outbidding each other on the global market, while ensuring security of supply across the entire EU.”

The EU hasn’t hastened to propose plans for capping the price of natural gas since the beginning of the Russian invasion of Ukraine and the subsequent severely reduced Russian pipeline gas deliveries to the EU, for fear that a cap on prices could be a disadvantage for Europe in the competition for bidding for supply on the international markets.

By Tsvetana Paraskova for Oilprice.com

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