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The price of gas for consumers in Europe must not exceed 180 euros. However, many exceptions can undermine the mechanism.
The good news: private households and companies should not pay more than 180 euros for one megawatt hour of gas. The gas price cap has finally been decided. However, Germany’s approval shows that the price correction mechanism could have no consequences.
For months, Spain, Greece, Poland and then France in particular have been pushing for a state-imposed upper limit for gas in the EU. In this way they want to protect their voters and their companies from the currently excessive energy prices.
For months, the EU Commission refused to submit a corresponding legislative proposal. The bureaucrats emphasized that this was far too complicated from a technical point of view and the negative consequences would outweigh the negative.
Controversy over price cap
Only when a majority of heads of state and government pressured the President of the EU Commission did she give in. However, the solution proposed by the EU Commission was tantamount to an affront. The permitted upper price limit for gas was set so high that it would hardly ever have been reached.
Since then, the EU countries have been arguing about the correct maximum price for gas and the conditions under which the price cap would be activated. Both camps persist in their preconceived notions: Germany, the largest gas consumer in Europe, the Netherlands, an important gas supplier, Hungary, which prefers to buy Russian gas, Austria – these countries continue to demand the highest possible price limit.
The advocates of a price cap demanded an unrealistically low price that could be sold domestically but could not be financed. The energy ministers finally agreed on an arbitrary amount of 180 euros.
Gas supply remains unpredictable
That makes things predictable for consumers. However, not for the national finance ministers. Because gas price caps do not make gas molecules cheaper on the free market, they simply define when the public sector takes over the bills from households and companies. That could get very expensive.
It could also be that liquid gas suppliers in the Gulf region would rather sell their gas to the highest bidder on the world market than haggle over euros with stingy EU importers. Whether that happens depends on China. If the demand for energy there increases again due to the economic recovery, there is a risk of shortages in Europe.
Real problem remains unsolved
This scenario could materialize next spring. Then the gas storage tanks in the EU would have to be refilled with liquid gas. The International Energy Agency calculates that the EU countries are missing almost ten percent of their annual gas consumption – regardless of the price.
The energy ministers may have agreed today on a gas price cap. But no one should think that this solves an urgent problem. The problem is that too much gas is still being consumed. And if Europe artificially lowers the gas price, then no one should be surprised if the desire to save also decreases.