The European Commission has warned member states of the European Union (EU) that imposing gas ceilings could be complicated and pose risks to energy security, in the context of countries calling for the EU to intervene to curb high fuel prices.
Reuters reported that on September 28, the European Commission shared a document with countries, analyzing different options that the EU could consider to curb high gas prices, after 15 of the 27 member states urged the EU to propose gas ceilings.
The document states that the wholesale price ceiling for gas - including liquefied natural gas (LNG) and pipeline gas - could disrupt gas flows between EU countries.
The Committee said that the reason is that the price signal will no longer help direct gas flows to places with high demand or scarce supply. Such a price ceiling mechanism can only be effective if a new agency is established to allocate and transport gas between member countries.
In addition, the EU will also need significant financial resources to ensure countries can continue to attract gas supplies from competitive global markets, where other buyers may be willing to pay higher than the EU price cap. The documents do not specify where that supply may come from.
In addition, applying a ceiling price to wholesale gas on a large scale will cause greater risks of supply disruption from foreign suppliers compared to the ceiling price of gas via pipeline.
The European Commission has analyzed other options to address the energy crisis. The document says the EU could impose a price ceiling for Russian gas imports or a price ceiling for gas used for electricity production as a way to curb rising electricity prices.
The Commission recommends that the EU negotiate with reliable suppliers to reduce prices and said that joint gas purchases could also help countries fairly share additional supplies.
EU countries are united on whether a wide-range gas price ceiling will help reduce supply shortages and increase energy prices due to Russia's gas cuts to Europe.
France, Italy, Poland and 12 other countries have urged the EU to propose a wholesale gas price cap to help curb rising inflation. Germany, the Netherlands and Denmark are among the countries that object.
Discussions on gas price ceilings may continue at the September 30 meeting of EU energy ministers. The meeting could also approve a package of measures proposed by the EU last week, including a windfall profit tax on energy companies.
