European energy industry urges EU to not cap gas prices

The European Union's gas and trading industries are urging it not to cap the gas price, while Brussels is looking for ways to protect businesses and consumers from rising energy prices.

The European Commission has been preparing a set of measures that will be presented on 26 February to help improve the competitiveness of industries and lower energy prices.

The cold weather and the depletion of gas storage tanks boosted this week's benchmark European gas price to a 2-year high of €58 per megawatt-hour (MWh). This has increased concerns over the higher energy costs European firms pay compared to their competitors in the U.S. or China. The industry is concerned that Brussels could revive the idea of capping the gas prices. This comes weeks after the previous EU gas cap, introduced during the energy crisis in 2022 but never used.

In a letter sent to Ursula von der Leyen, the President of the Commission, the industry groups stated that "we believe this measure could have far-reaching adverse consequences for the stability and security of the European energy markets."

The letter stated that a cap would "harm trust" in EU benchmark gas prices, encourage market participants to switch over to other gas reference prices outside of the EU and make it more difficult for Europe to attract LNG cargoes on price-competitive markets around the world.

The signatories of the letter included Eurogas, Energy Traders Europe and the Association of Energy Exchanges Europex. Also, AFME, a financial markets association, was a member. According to people familiar with the discussions, The Financial Times reported Wednesday that the Commission was considering a cap on gas prices as part of its package of support this month for the industry.

On Wednesday, a senior EU official said that the idea is not being considered. Industry and national governments including Germany and The Netherlands were also opposed to the EU's former gas price cap. They warned that it would hinder Europe's ability secure fuel supplies.

The cap was intended to be activated if European gas costs reached 180 euros per megawatt-hour. The cap was never activated, because the benchmark EU gas prices have not reached this level since the energy crisis of 2022 when Moscow cut gas deliveries into the region. (Reporting and editing by Bernadettebaum)

(source: Reuters)