(Bloomberg) -- European leaders are beginning to discuss whether to implement a cap on natural gas prices, but some admitted that it’s not clear yet what kind of mechanism they’ll consider.
“We won’t debate whether we agree on terminology, but rather if we understand the measures in the same way,” Slovenian Prime Minister Robert Golob said Thursday as he arrived at a meeting of European leaders in Prague. Discussions on price caps have been a bit “simplified” so far.
European Commission President Ursula von der Leyen laid out proposals on Wednesday that included a temporary price limit in relation to the Dutch Title Transfer Facility, capping the cost of gas used for power generation and creating a new benchmark.
French President Emmanuel Macron said he supported von der Leyen’s proposals but didn’t offer any more details.
“We support the commission proposals announced yesterday, a strategy to lower prices, to have a cap on gas used to produce electricity,” Macron told reporters.
On Thursday, Italy, Greece, Poland and Belgium circulated a proposal that would establish a corridor or range around the gas price cap at the region’s biggest trading hubs that would allow prices to fluctuate by around 5% for example, according to a document seen by Bloomberg News.
Discussion of how to lower gas prices had been deferred by European Union energy ministers at previous meetings because it’s knotty and there isn’t a wide consensus. A price cap on all wholesale gas market transactions has been urged by at least 15 member states, including Spain, Italy, Belgium, Poland and Greece. Germany, the region’s biggest economy, has been against such a move.
Decisions are unlikely to be made before the next leaders’ summit in Brussels on Oct. 20-21 but hashing out what exactly is on the table will be key to getting support.
Energy companies have been wary of the price-cap discussions, warning that such a mechanism risks denting gas supplies to the continent.
“We all recognize that action is needed to address the current situation in the market, Cederic Cremers, Shell Plc’s executive vice president for LNG, told reporters in London on the sidelines of an energy conference. “In something like a price cap or intervening with the market pricing we have to be extremely careful for what that means, for what that means in terms of ensuring that it doesn’t impact the amount of gas that will flow to Europe, that it doesn’t impact the type of price signals that the market needs to move the product around geographically as well as in time.”
The latest EU discussion come after the bloc has already agreed to impose windfall taxes on energy companies’ profits and to power- and gas-demand reduction goals to contain an unprecedented energy crunch triggered by a cut in supplies from Russia after its invasion of Ukraine.
Germany, one of the hardest hit by the gas crisis, said that the main aim of discussions should be how to lower costs.
“We need to make sure that European energy prices sink dramatically, and they will,” said German Chancellor Olaf Scholz.
(Updates with price-cap proposal, Shell executive’s quote starting in sixth paragraph)
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