European Commission Warns EU That Gas Price Cap Poses Risks

European Commission Warns EU That Gas Price Cap Poses Risks

In response to appeals from several nations for Brussels to act to control skyrocketing gasoline costs, the European Commission has issued a warning to EU member states that a broad cap on gas prices could be difficult to implement and present dangers to energy security, Reuters reported.

The Commission shared a document with countries on Wednesday, analyzing various options the EU could consider curbing high gas prices, after 15 of the bloc’s 27 member states this week urged the EU to propose a cap on gas prices.

After 15 of the EU’s 27 member states pushed the EU to to propose a cap on gas prices, the Commission shared a document with nations on Wednesday that examined potential possibilities the EU may adopt to lower high gas prices.

According to the document, which Reuters was able to view, a wholesale price cap for exchange operations that would apply to both pipeline supplies and liquefied natural gas may stymie fuel flows between EU nations.

The reason for this, according to the Commission, is that price signals would no longer serve in directing flows to areas with strong demand or limited supply. It claimed that in order for such a price cap to be effective, a new entity would need to be established in order to distribute and transport limited petroleum supplies across states.

According to the Commission, the EU would also require “significant financial resources to guarantee that countries could continue to draw gas supplies from globally competitive markets where other purchasers could be willing to pay prices beyond the EU ceiling. Where such resources might come from was not stated.

A broad wholesale gas price cap would pose a bigger “risk of triggering supply disruptions” from foreign suppliers than a cap on just pipeline deliveries, it added.

The Commission examined further energy-related solutions, such as more stringent gas price controls.

The Commission suggested that the EU bargain with “reliable” suppliers to lower prices and claimed that cooperative gas purchasing may support equitable supply sharing across nations.

At a meeting of EU energy ministers on Friday, discussions on potential gas price restrictions will continue. The ministers are also expected to endorse a package of policies put up by Brussels last week, which includes windfall profit levies on energy companies.

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