Fix a ceiling on the price of gas at European level. The topic agitates the recently concluded EU Council even if the decisions have been postponed until October. The idea launched months ago by Mario Draghi is starting to make headway, even if for now it has been postponed until October, when – according to our own premier – it could "be late". But the fear of Russian retaliation makes headlines and this is what is holding back Europe and above all Germany on the price cap. In reality, the cut in deliveries of Russian gas to Europe decided by Gazprom, the surge in prices which have gone from around 85 euros to more than 130 euros per megawatt hour in a short time, the need to defuse the geopolitical weapon in the hands of Vladimir Putin against Europe in the war with Ukraine: there are many reasons which push towards the adoption of more sophisticated measures than the simple sanctions already adopted by the EU, in the tug of war with Moscow on energy. In the background, the hypothesis of gas rationing next autumn is becoming more and more likely.
Russian gas, how the price cap proposed by Italy works
Desperate times call for desperate measures. The reference gas price for Europe is formed in Holland on TTF market . It is a market where negotiations are exchanged between those who sell Russian gas and those who want to buy it. Speculation is doing very well these days and this explains why the Dutch government is extremely reluctant to accept price limits.
“The imposition of a ceiling on the price of Russian gas would make it possible to reduce financial flows to Moscow,” Prime Minister Mario Draghi recently recalled. Less gas to Europe, less resources to finance the war in Ukraine.
Specifically, it is a question of identifying a mechanism for setting a ceiling on gas trading platforms, a price above which European operators cannot buy. The hypothesis is that of a maximum threshold between 80 and 90 euros per megawatt hour.
Russian gas, what is the gas price ceiling for?
The gas price ceiling, if introduced, will defuse a powerful weapon in the hands of Moscow which has so far reduced the quantities supplied to Europe and collects colossal figures: 62 billion since the beginning of the war in Ukraine. It also helps to reduce inflation driven by energy prices. And it could also bring about beneficial effects on tariffs given that those of renewables are anchored to the price of electricity production which is still closely linked to gas plants.
However, Europe does not import gas only from Russia and the gas price ceiling could also have an impact on other producers who, for sure, would not be enthusiastic about it, and could push producers to divert deliveries to Asian countries. This latter operation is easier said than done because gas requires transportation infrastructures (gas pipelines) or regasification plants that cannot be built in a day.
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Who opposes the Italian proposal and why
The Nordic countries and Holland, as mentioned, are against the introduction of a ceiling on the prices of gas imported from Russia. they consider it a step backwards compared to the liberalization of the energy market. But Amsterdam's opposition is more prosaic than ideological: the TTF (Title Transfer Facility) is located in the Netherlands and is managed by Gasunie, the Dutch state company that deals with gas transportation. Holland is a producer of gas in Groningen and due to its geographical position it allows exchanges between Norway, Germany, France and Italy. The TTF has quickly become the go-to market for Europe.
"We are not against" the gas price cap "in principle but, based on the evidence we have, we think it might not work as some think," Prime Minister Mark Rutte said during the EU Council, which sees important revenues disappear. Surprisingly, Germany supported, albeit timidly, Italy's line shared by France, Spain, Portugal and Greece.
