EU Gas Price Cap Ends As Energy Crisis Eases

The European Union's gas price cap, enacted during the 2022 Russian gas crisis, is set to expire without ever being activated. Despite initial concerns, the cap wasn't needed as the EU's energy crisis subsided. Differing opinions amongst EU countries highlight the debate over its necessity and effectiveness.

The European Union's gas price cap, introduced during the 2022 Russian gas crisis, is set to expire on Friday. The cap was intended to trigger if gas prices skyrocketed to extreme levels, a response to months of spiking energy prices after Russia significantly reduced gas supplies following its Ukraine invasion.

Originally designed to activate once European gas prices reached 180 euros per megawatt hour, this threshold hasn't been met since the worst of the crisis in 2022, when prices soared above 300 euros/MWh. As of Friday, the benchmark front-month gas contract at the Dutch TTF hub traded above 52 euros/MWh, marking a new high for 2023 but remaining well below 2022 crisis levels. The EU's decision to let the cap expire suggests the peak of Europe's energy turmoil has passed. Despite potential cold spells, EU gas storage is adequately stocked, and non-Russian gas supplies have increased.

There was significant division among EU states and industries regarding the price cap. While countries like Germany voiced concerns about potential disruptions to energy markets and impediments to Europe competing for gas supplies globally, others, including Italy, advocated for maintaining and modifying the cap. Industry group Eurogas supports moving away from such emergency measures, questioning their real effectiveness and potential to cause market distortions.

(With inputs from agencies.)