In recent days, the gas and energy industry in Europe has strongly called for the European Union to refrain from setting a price cap on gas. This request comes as Brussels seeks to adopt measures to protect consumers and businesses from rising energy prices.
Serious Concerns in the Gas Industry
The European Commission is preparing a package of measures that is set to be introduced on February 26 to improve the competitiveness of industries and reduce energy prices. Gas prices in Europe have reached their highest level in two years this week, at 58 euros per megawatt hour (MWh). This increase is due to severe cold and reduced gas reserves, raising concerns about the high energy prices that European companies face compared to their competitors in the United States and China.
Companies in this industry are worried that these conditions may encourage Brussels to revive the idea of setting a gas price cap. This comes despite the fact that the previous price cap, which was approved during the 2022 energy crisis, was never implemented.
Negative Consequences of a Price Cap
In a letter sent to Ursula von der Leyen, President of the European Commission, industry leaders warned that if this action is announced, it will have profound negative consequences for the stability of European energy markets and the security of energy supply on the continent. They emphasized that setting a price cap would make the "trust" in the EU's reference gas price vulnerable and would lead companies to turn to reference gas prices outside the EU.
This letter has been signed by industry associations including Eurogas, Energy Traders Europe, and the European Energy Exchanges Association. Reports indicate that the European Commission is considering this issue as part of this month's support package for the industry, but a senior EU official recently stated that this idea is not currently under review.
Additionally, the previous price cap faced strong opposition from the industry and national governments, including Germany and the Netherlands, which warned that this action would disrupt Europe's ability to secure fuel. The price cap set to activate if gas prices rose to 180 euros per megawatt hour was never triggered, and the EU's reference gas prices have not reached this level since the energy crisis in 2022.
