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Europe is even arguing about the gas price cap, which isn't one at all

In the EU it is not only important what the states decide at their meetings in Brussels.

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Europe is even arguing about the gas price cap, which isn't one at all

In the EU it is not only important what the states decide at their meetings in Brussels. At least as important for some governments is how they can sell the Brussels resolutions to their people at home.

A growing number of EU countries have been demanding EU price caps for natural gas for months. Germany, the Netherlands and other market-liberal states from the north of the continent have been blocking the project for almost as long. The European Commission, which has the right to initiate legislation at EU level, is entirely in line with Germany and does not want the cap either.

They warn that ships carrying LNG liquefied gas will call at Asian ports if the EU gas price cap is too low. And they fear that capped gas prices could override the price's disciplining effect and encourage households and businesses to consume more of the scarce commodity.

Despite falling gas prices, the tone in the dispute over a gas price cap is getting sharper, and the demands for it, especially from southern European countries, are getting louder. Most recently, Belgium, Greece, Italy and Poland threatened to block other decisions on the gas market at the energy ministers' meeting. A sharp-tongued diplomat has dubbed the group the "Fanatical Four".

At the beginning of November, Ursula von der Leyen reacted to the increasingly harsh tone and promised her authority a legislative proposal for a gas price cap. However, what Energy Minister Kadri Simson has now presented is at best a pseudo gas price cap: it is an emergency brake for the gas market, which should only come into effect in exceptional situations. This should prevent extreme price peaks like in the summer, when the EU countries outbid each other in gas purchases.

In fact, the gas prices in August on Europe's most important trading platform TTF were not only extremely high, but also fluctuated greatly: the futures market price for a cubic meter of gas for delivery a month later was 320 euros on August 26, but five days later on 31 August at only 231 euros.

Since then, the price has fallen dramatically: on November 22, it was only 116 euros per cubic meter for delivery in mid-December.

The new emergency brake is intended to prevent such an extreme development: it is to come into force automatically in the future and cap the price of gas on the TTF trading venue at 275 euros. The emergency brake would come into effect automatically if two conditions are met: the price of a cubic meter of gas for delivery a month later must have been above 275 euros for two weeks. And this price must also have been 58 euros above the world market price for LNG gas for ten days.

An EU authority calculates the world market price as the average of various international price indices. The cap should be based on prices in other regions of the world so that it is not more attractive for LNG suppliers to head for other markets.

However, this emergency brake is intended to be temporary and only covers part of the gas business, namely trading in gas for delivery in the following month. This affects 22 percent of the futures market. The regulation does not cover the spot market, daily trading and over-the-counter trading.

However, even this emergency brake will not reduce the gas prices, which are still very high in a long-term comparison. "We respond to periods of excessive prices with this market correction mechanism," said a senior Commission official. "But we're not addressing the problem of today's high prices."

It is a typical EU proposal that the Commission can use to please all member states: the advocates of an actual gas price cap could announce at home that they have put a lot of pressure on and that Brussels has finally complied with their demands. And member countries like Germany would have averted an actual gas price cap for the time being.

But, although the proposal is not even about an actual gas price cap, a dispute has already broken out between the member states in Brussels. "We still have a lot of unanswered questions after analyzing the proposal," says an EU diplomat. "And that's the same in other countries." A dynamic price cap is preferable to a fixed price cap.

In addition, Germany and other countries apparently only want to agree to the proposal if the EU commits to stricter gas saving targets at the same time. The EU countries have currently committed themselves to voluntarily consuming 15 percent less gas every month until March than in the same month of the previous year. This savings target can only become mandatory in the event of a gas shortage. Thanks to well-stocked gas storage facilities, the EU is still a long way from that.

However, this savings target is not enough for a number of north and north-west European countries. According to Brussels, the federal government wants to make a savings target of 25 percent compared to consumption in the previous year a condition so that it agrees to the emergency brake for the futures market.

Berlin is apparently relying on the support of like-minded countries. According to another government, they also want more ambitious savings targets. Whether it absolutely has to be 25 percent is another matter.

For Germany, the goal would probably be easy to achieve: In August and September, 20 percent and 21 percent less gas was consumed in Germany than in the previous year, according to the Federal Network Agency. It would be more difficult for other countries like Spain, which use a lot of gas to produce electricity.

However, it is not entirely clear whether such demands are really meant seriously or whether they are just part of a staging at EU level. Above all, countries like Germany, which do not want an actual gas price cap, could be keen to exaggerate the discussion about the emergency brake for the futures market - and to distract a bit from the fact that a gas price cap is still not coming.

Especially since the proposed emergency brake for the futures market could hardly be practicable anyway: When asked whether the conditions for triggering the emergency brake were ever present in the last extreme August, Energy Commissioner Kadri Simson had no answer when presenting the plans.

It was not until 10:25 p.m. on Tuesday evening that a commission spokeswoman gave an official answer to the question. She was sobering: "The episodes in August were of a similar nature to those we are tackling with the marrow correction mechanism, but would not have triggered the correction," she wrote in Brussels prose.

And further: The wishes of the EU summit in October to ensure security of supply and demand were taken into account. In other words, the federal government, the Netherlands and other countries have asserted themselves with their concerns. For the Green MEP Rasmus Andresen, an absurdity: "The limit is too high and will not make any significant contribution to lowering prices sufficiently." In any case, it should cause discussions when the energy ministers meet on Thursday.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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