15 EU member states call for price cap on all wholesale gas transactions

A total of 15 EU member states have called on the European Commission to present a proposal for a price cap on all wholesale gas transactions given the worsening European energy crisis.

In a letter to the EC energy commissioner Kadri Simson, energy ministers from the 15 member states urged the EC to present a proposal for a wholesale gas price cap at a meeting of EU energy ministers on Sept. 30.

"The energy crisis that started last fall has gotten worse over time and is now causing untenable inflationary pressures which are hitting our households and our businesses hard," the ministers said.

"We acknowledge the efforts made by the Commission and the measures it has put forward to face the crisis. But we have yet to tackle the most serious problem of all: the wholesale price of natural gas," they said.

European gas prices have been at sustained highs since September 2021, first due to Russian supply constraints and concerns over storage levels heading into last winter, followed by a surge in prices after the Russian invasion of Ukraine on Feb. 24, and most recently the ratcheting down of Nord Stream pipeline flows from Russia to zero.

Platts, part of S&P Global Commodity Insights, assessed the Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh ($306/MW) on Aug. 26. It was last assessed at Eur207/MWh on Sept. 27, still almost 200% higher year on year.

Greece and Italy were the first countries to propose a price cap on wholesale gas, with other member states also now backing the move.

"The price cap that has been requested since the beginning by an ever increasing number of member states is the one measure that will help every member state to mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector," the ministers said.

"The cap should be applied to all wholesale natural gas transactions, and not limited to import from specific jurisdictions," they said.

Supply security

The ministers said the cap could be designed in such a way as to ensure security of supply and the free flow of gas within Europe, while achieving the EU's shared objective to reduce gas demand.

"This cap is the priority and can be complemented with proposals to strengthen the financial oversight of the gas market and develop alternative benchmarks for gas pricing in Europe," they said.

The ministers called on Simson to present a proposal to be discussed at the extraordinary energy council on Sept. 30 followed by a legislative proposal "as soon as possible."

The letter was signed by the energy ministers from (in alphabetical order): Belgium, Bulgaria, Croatia, France, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain.

Notably absent from the list are Germany and the Netherlands, which have warned of the potential for unintended consequences from a price cap.

It remains unclear whether the EC is considering a cap on the price of imported gas, on the wholesale price of gas, or whether a more general retail price cap could be considered.

A cap on Russian gas prices has already been dismissed by member states.

Some in industry have warned also that any cap on the price of European gas could lead to an increase in consumption at a time when the EU is striving to cut gas demand.

"Depending on where the price cap will be, it could also lead to a demand increase," German chemicals company BASF's team lead for gas contracting and regulatory affairs, Jochen Wagner, said this month.

According to sources, there is also concern among EU member states that capping the price of imported gas, for example, could jeopardize supply security, with producers opting to send gas to higher price markets instead.

The global LNG market in particular remains very competitive, with Asia also looking to secure cargoes over the winter.

Major gas supplier Norway has also warned against a price cap, with its Prime Minister Jonas Gahr Støre saying Sept. 12 he was "skeptical" about the effectiveness of an EU gas price cap.