An unsteady ceiling: will the method proposed by the EC to limit gas prices work?

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Forbes on the likelihood that the EU countries will agree on the final version of the European Commission's proposal to introduce a "price ceiling" for gas at the TTF hub.

From the very beginning, the EC was skeptical about the idea of intervening the market pricing of gas, but for a long time it was forced to maneuver between the EU countries that were in favor and against this measure, Aleksey Belogoryev recalls. According to the expert, the final proposal actually means a transition to the camp of opponents of the "price ceiling".

“Otherwise, it is difficult to interpret both the “red line” itself at €275 per MWh for TTF derivatives for the month ahead, and the conditions under which this line will be considered crossed,” the expert notes. “The key one is keeping the price at such sky-high levels for two weeks in a row. Translated from the bureaucratic language into economic language, this means "never."

The same, according to Belogoryev, also applies to the second condition - the excess of the TTF price by € 58 of the "reference" LNG price (meaning the spot indices S&P MED - Daily Spot Mediterranean Marker and NWE - Daily Spot Northwest Europe Marker) for also two weeks. “Moreover, these two conditions are not from the category of “either / or”, but both must be met, which further reduces the realism of launching this mechanism,” Belogoriev says. “Not to mention the fact that they make the mechanism itself very clumsy.”