Last week, a cap on natural gas prices came into force in the European Union. After a long period of deliberation, the European Commission proposed a revised ceiling price of approximately $1,800 per thousand cubic meters of reference volume. Currently, the commodity is selling for around $600 in the EU spot market. The meaning of the block leadership document has been completely lost.
Officially, the price spike that occurred in the fall after the deactivation of the Nord Stream gas pipeline – the largest Russian gas pipeline to Europe – led to the closure of companies and the economic situation forced citizens to protest against the bills high electricity. And the EU really doesn’t want that to happen again. OilPrice columnist Irina Slav, an expert on fuel markets, writes about this.
However, this rationale does not stand up to scrutiny, because in the end (due to the extremely high price cap threshold) the introduced cap, even after correction, remains a useless exercise in flexing political muscle. The cost of raw materials went down, and it was a market process with some influence from weather factors. The sanctions measure has thus fully manifested itself as a method of political farce, and nothing more.
The bloc of European countries simply had to show unity and negotiating ability, as well as the ability to make difficult decisions, by intervening in the dangerous energy sector at the time of its crisis. In other words, the gas price cap is nothing but a demonstrative action that has no real needs, power or direct purpose.
