European Commission President Ursula von der Leyen outlined five key proposals to rein in low energy prices that have plagued the EU this summer – including a cap on the price of Russian natural gas, despite President Vladimir Putin’s threats that Moscow will stop any action. supplies if the bloc took such a step. European Union energy ministers will discuss the measures at an emergency meeting this Friday amid accusations that Russia is actively manipulating the gas market as it continues its war against Ukraine. August was the most expensive month for electricity in Europe, according to Rystad Energy, a research and business intelligence firm. As rising gas prices sent bills soaring across the continent, EU governments spent millions to stop their energy suppliers from collapsing and prevent cash-strapped customers from being frozen out in the cold months ahead. Policymakers have also tried to find ways to ease the ever-increasing pressure on consumers and businesses and avoid financial disaster. Britain is weighing a huge support package as Europe battles the energy crisis Europe has accused Russia of rigging energy supplies in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine. Russia blames these sanctions for causing gas supply problems, which it attributes to pipeline faults. Ms von der Leyen said a price cap on Russian gas would prop up current trade sanctions that are already “straining the Russian economy deeply”. “We need to cut Russia’s revenue, which Putin is using to finance the horrible war in Ukraine,” he said on Wednesday. Mr Putin had predicted the move and said Russia would respond. “We will provide absolutely nothing if it conflicts with our interests,” he told an economic forum in Vladivostok. “We will not supply natural gas, oil, coal, heating oil – we will not supply anything.” Monthly average European spot energy prices 2021-2022, in euros per MWh Weekly average European spot energy prices Russian gas Supply disorders the globe and mail, Source: RYSTAD ENERGY Monthly average European spot energy prices 2021-2022, in euros per MWh Weekly average European spot energy prices Russian gas Supply disorders the globe and mail, Source: RYSTAD ENERGY Monthly average European spot energy prices 2021-2022, in euros per MWh Weekly average European spot energy prices Russian gas Supply disorders the globe and mail, Source: RYSTAD ENERGY Along with the price cap in Russia, European leaders will discuss curbing electricity consumption through a mandatory target to reduce peak-hour energy use. They will also consider a plan to limit the revenue of both fossil fuel companies and those that generate low-cost electricity without using natural gas, for example through renewable energy sources. Under the plan, EU member states would impose a windfall tax – which von der Leyen called a “solidarity levy” – on fossil fuel companies and use the cash to support vulnerable households and companies and boost investment in renewable energy sources. Oil and gas companies have made huge profits because of the energy crisis, Ms von der Leyen said, adding that “all energy sources must help to overcome this crisis”. Rising electricity prices have put pressure on utilities, which have been stretched financially by volatile electricity markets. The fifth proposal announced on Wednesday involved a plan to help boost liquidity for energy companies to secure futures contracts. (Unlike spot prices, futures contracts delay the payment and delivery of energy to a predetermined date in the future.) The EU said its member states would help by providing liquidity support through emergency credit lines and limits on margin calls. “These companies are currently being asked to provide unexpectedly large amounts of capital now, which threatens not only their ability to trade, but also the stability of the futures markets,” Ms von der Leyen said. “These are difficult times and they will not end soon. But I am deeply convinced that if we show solidarity, unity and have the determination for it, we have the economic power, we have the political will, then we will overcome them.” The five-point plan announced on Wednesday follows several moves by the bloc earlier this year to weaken Russia’s commitment to EU energy supplies. It has created a joint natural gas storage system that is already at 82 percent capacity, for example, halted imports of Russian coal and made moves to limit Russian oil supplies. It has also invested heavily in renewable energy and diversified its natural gas suppliers to lean more heavily on the United States, Norway, Azerbaijan and Algeria. After Russia invaded Ukraine in February, European gas prices were volatile, reaching record highs in August before falling as fears over the severity of fuel shortages eased. Russia supplied nearly 40 percent of the EU’s total gas consumption last year, according to the International Energy Agency, but Ms von der Leyen said on Wednesday that those imports had fallen to just 9 percent. Carlos Torres Diaz, head of energy research at Rystad Energy, told The Globe and Mail that the EU needs to be very careful in whatever approach it takes to ease its energy woes. “I think it’s a dangerous approach to start intervening in the market,” he said in an interview from Oslo, where his own electricity bills have quintupled in recent months. “It could cause some unexpected developments. Some producers may not be willing to produce as much because they are not incentivized as much, or it could also have longer-term consequences with investment, for example, because by intervening in the market you are more uncertain about what could be coming for future projects ». While he is skeptical that a Russian price cap will help, given the high likelihood that Russia will simply stop all exports to Europe in retaliation, Mr Torres Diaz pointed to a windfall tax as the proposal most likely to reduce pressure on consumers. “You still need natural gas, electricity. So then you help those companies that might be struggling to get the gas or the electricity, and then you can also distribute all that money to the entire population to pay the bills,” he said. Reported by Reuters Your time is valuable. Deliver the Top Business Headlines newsletter to your inbox morning or night. Sign up today.
