The bloc has shunned Russian pipeline fuel in favor of pricier liquefied pure fuel imports from Western suppliers
EU leaders are deliberating instituting a cap on pure fuel costs, which have been surging not too long ago, the Monetary Instances reported on Wednesday. Business teams, nevertheless, have cautioned that such a measure may disrupt market stability and the safety of provide.
In current weeks, fuel costs within the EU have soared, with the Dutch Title Switch Facility (TTF), the European benchmark, hitting a two-year excessive of €59 ($61) per megawatt-hour on Tuesday. This has been attributed to a spate of chilly climate, lowered renewable vitality output, and provide issues.
Through the 2022 vitality disaster, the EU launched a worth cap mechanism with a TTF goal of €180 per megawatt-hour, but it surely by no means kicked in earlier than expiring this yr. In a report this previous September on EU competitiveness, former European Central Financial institution President Mario Draghi proposed a “dynamic cap,” which he argued may discourage hypothesis within the spot market. He stated such a mechanism might be used when EU vitality costs diverge considerably from world charges.
“We’re finding out intimately Draghi’s suggestions on this particular concern,” an nameless EU official advised FT. Whereas discussions are nonetheless within the early phases, sources stated a optimistic resolution might be introduced subsequent month as a part of Brussels’ technique to strengthen the EU’s heavy industries.
Nevertheless, fuel merchants have voiced their opposition to the proposal in a letter to European Fee President Ursula von der Leyen, the report added. They warned {that a} worth cap “may have far-reaching unfavorable penalties for the soundness of European vitality markets,” as suppliers would possibly flip to reference costs exterior the attain of the EU.
The institution of the fuel spot market within the EU was meant to create a extra responsive pricing system primarily based on provide and demand fluctuations. Provider nations have lengthy cautioned that changing long-term contracts with variable pricing would improve volatility. Russia, traditionally a serious provider of fuel to the EU, has been a notable critic of the coverage.
The EU dedicated to phasing out Russian provides in response to the escalation of the Ukraine battle in 2022, claiming that Moscow had “weaponized” its hydrocarbons towards European shoppers. Consequently, the bloc has turned to pricier liquefied pure fuel (LNG) imports from nations such because the US and Norway, contributing to rising vitality prices.
US President Donald Trump has referred to as on EU nations to spice up their purchases of American LNG, threatening commerce tariffs for non-compliance. Von der Leyen said on Tuesday that “unjustified tariffs on the EU is not going to go unanswered,” signaling potential countermeasures.
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