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Europe’s Energy Ministers Fail to Agree on Plan for Natural-Gas Price Curb (video) – WSJ

EU countries have struggled to reach agreement on a natural-gas price cap that some worry could hamper supplies

The proposed price cap on natural gas has been widely criticized by EU countries on both sides of the debate.
The proposed price cap on natural gas has been widely criticized by EU countries on both sides of the debate. (Kenzi Tribouillard/AFP)

Kim Mackrael, WSJ

EnergiesNet.com 12 14 2022

European energy ministers again failed to reach an agreement Tuesday on the details of an emergency cap on natural-gas prices that has divided the continent in its response to Russia’s squeeze on energy supplies.

The proposal would set a limit on month-ahead prices on the European Union’s main trading hub and was put forward last month by the bloc’s executive body, the European Commission. It was widely criticized by EU countries on both sides of the debate, with some warning of unintended consequences and others saying the proposed cap was too high to be effective.

Officials said on Tuesday that energy ministers made progress on certain aspects of the plan, including the conditions under which the price cap could be automatically deactivated. But they were unable to reach an agreement on what level the price cap should be set at.

“We were so close today,” said Jozef Sikela, minister of industry and trade for the Czech Republic, which holds the EU’s rotating presidency. He said energy ministers would resume their discussions at another meeting on Monday.

“There will be only one open issue for the discussion on Monday, and this is the price level triggering the mechanism,” Mr. Sikela said.

How cap on Russian oil price could affect U. S.  consumers
Watch video: How cap on Russian oil price could affect U. S. consumers Illustration: WSJ

The push to set a limit on natural-gas prices comes after Russia’s invasion of Ukraine and its throttling of natural-gas supplies have pushed up energy prices and sparked concerns about possible shortages. Earlier measures taken by EU countries include a plan to redistribute a portion of energy companies’ high profits and revenues and efforts to reduce gas consumption.

EU member countries also separately this month agreed to an international plan to cap prices paid for Russia oil around the world.

Tuesday’s energy discussions took place as the EU moved toward a deal on fresh loans for Ukraine for 2023, which were being held up by Hungary because of its fight with Brussels over Budapest’s access to EU funds.

Under the preliminary deal, which must still be confirmed by capitals over the next 24 hours, member states agreed that the EU should go to the capital markets to raise 18 billion euros, equivalent to $18.97 billion, in funding for Ukraine for 2023 and the bloc agreed to move ahead with the international 15% minimal corporate tax proposal.

In exchange, ministers agreed that Hungary should receive access to €5.8 billion in pandemic recovery funds once it completes a package of domestic anticorruption reforms. Member states also agreed to slim down the amount of regular budget funds that Hungary will see frozen because of what Brussels said is Prime Minister Viktor Orban’s failure to properly oversee how the money is spent.

The commission’s original proposal to cap natural-gas prices suggested a limit of €275 a megawatt hour. But the plan said the limit could only be activated under certain conditions: Prices would need to remain above that level for two weeks, and would need to be higher than a reference level for liquefied natural gas prices for at least 10 consecutive days.

Countries that have been calling for a natural-gas price cap, including Italy, balked at the criteria, saying the level was set too high and the rules for triggering it were so strict that it was unlikely to be used. Other EU countries, including Germany and the Netherlands, have said any move to artificially limit prices risks diverting supplies to other jurisdictions.

The inability to reach an agreement on the price cap is also holding up separate proposals to speed up permitting for renewable energy projects and allow companies to buy natural gas together. EU energy ministers agreed last month on the substance of those proposals but decided to hold off on formally approving them until a deal on the plan to cap natural-gas prices could be reached.

European Commission President Ursula von der Leyen on Monday urged ministers to move the proposals forward. “What we need now is a political agreement,” she said, adding that she hoped a deal could be reached in the coming days.

Many analysts expect Europe to make it through the current winter without running into serious shortages, in part because of warmer-than-usual fall temperatures so far. But they warned that next year could be more difficult because of a further reduction in Russian gas supplies and a tight global market for liquefied natural gas.

Laurence Norman contributed to this article.

Write to Kim Mackrael at kim.mackrael@wsj.com

Appeared on the WSJ, in the December 14, 2022, print edition as ‘European Ministers Spar Over Gas Limit’.

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