Europe finally agrees to cap gas prices | CNN Business - Pegars News | Pegars News

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Europe finally agrees to cap gas prices | CNN Business – Pegars News

Europe finally agrees to cap gas prices | CNN Business – Pegars News


London
CNN Business
 — 

Europe has agreed to a cap on pure gas prices, following months of debate over whether or not the measure will shield European households and companies from excessive value spikes as temperatures plummet.

In a Monday assembly, EU power ministers agreed to set off a cap on the value of month-forward pure gas futures on the Dutch Title Transfer Facility (TTF) — the bloc’s benchmark gas alternate — to €180 ($191) per megawatt hour if it exceeds this degree for greater than three consecutive working days.

The cap will additionally apply to three-month and 12 months-forward gas trades, and it will stay energetic for at least 20 working days as soon as triggered. It is deliberate to come into drive as of February 15 of subsequent 12 months.

“We have the deal,” Jozef Síkela, deputy prime minister for the Czech Republic, mentioned at a Monday press convention. The Czech Republic at present holds the presidency for the EU Council.

The value ceiling is much decrease than the €275 ($292) per megawatt hour restrict initially proposed by the European Commission final month.

The cap would additionally be triggered if prices hit at least €35 ($37) increased than a reference value for liquified pure gas (LNG) for the identical interval. Prices for LNG — a relaxing, liquid kind of gas that can be transported by way of sea tankers — are tightly linked to prices for Europe’s pure gas delivered by pipelines.

Síkela described the cap as a “temporary, effective [and] realistic mechanism which will protect citizens and businesses from the excessive gas prices we have seen this summer.”

“This is not a fixed cap, but rather a dynamic one,” he added.

The cap is the newest in a raft of measures agreed by the European Union this 12 months to stem an power disaster sparked by Russia’s invasion of Ukraine that has pushed up prices and fueled the highest inflation in many years.

Gas prices spiked to a file excessive of round €345 ($367) per megawatt hour in August, after Moscow decreased gas deliveries to the continent. TTF gas futures fell again 5% on Monday to hit €107 ($114) per megawatt hour.

Other EU measures have included gas storage necessities and a value cap of $60 a barrel on seaborne Russian oil.

Despite Monday’s political settlement, analysts and merchants stay involved that the mechanism might backfire –— inflicting prices to rise and worsening potential provide shocks.

Germany, the bloc’s largest financial system and one of its largest importers of pure gas, had been the most notable holdout earlier than Monday’s announcement.

“Gas traders would likely liquidate short positions and stop selling futures if they fear the break could be activated imminently, for fear of the resulting losses,” analysts at Eurasia Group mentioned in a Monday word.

Following the announcement, a spokesperson for the Intercontinental Exchange, which operates the TTF, mentioned that it had “consistently voiced our concerns about the destabilizing impact a [price cap] will have on the market.”

The spokesperson mentioned the alternate was reviewing the particulars of the new proposal and “whether [it could] continue to operate fair and orderly markets for TTF from the Netherlands.”

Trading on the TTF will proceed to function as typical for the foreseeable future, they added.

In mild of considerations, Síkela mentioned that the cap might be “automatically deactivated” in a number of situations, together with when gas consumption throughout the bloc is excessive, if buying and selling on the TTF declines, or if quarterly imports of LNG fall.

The proposal nonetheless requires a “qualified majority” to be carried out, which means that 15 nations representing at least 65% of Europe’s inhabitants should agree to it.

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