EU Summit: No Agreement on Gas Price Cap

After a two-day summit in Brussels, EU leaders announced on Friday that they had put together a "roadmap" to lowering energy bills but have yet to reach an agreement on a gas price cap. The meeting comes amid soaring energy costs from the war in Ukraine.

EU Summit: No Agreement on Gas Price Cap
Image credit: Reuters [via Al Jazeera]

Facts

  • After a two-day summit in Brussels, EU leaders announced on Friday that they had put together a "roadmap" to lowering energy bills but have yet to reach an agreement on a gas price cap. The meeting comes amid soaring energy costs from the war in Ukraine.
  • Before the conflict, the EU reportedly received 40% of its gas from Russia, but in July, it cut this down to 15%. This saw Moscow slash supplies, exacerbating the increase in prices. At the end of August, EU gas prices hit more than $335 per megawatt-hour — a record high.
  • At least 15 countries want a price cap amid fears that cost of living strikes and protests will spread across member states. However, Germany — the EU's biggest economy — dissented, arguing that gas supplies could shift to more lucrative markets in Asia.
  • The summit didn't specify any timeframe for the EU to decide on a price cap, but EU energy ministers will meet on Tuesday in Luxembourg for further discussions.
  • In the meantime, the European Commission suggested that the 27 EU members combine their gas purchases and proposed a substitute price benchmark for liquified natural gas. While EU leaders backed this on Thursday, the proposed measures would require the implementation of new laws, which would need to be negotiated in the coming weeks.

Sources: DW, Al Jazeera, France24, and Reuters.

Narratives

  • Narrative A, as provided by NGI. Though experts are still struggling to analyze the impacts of a price cap given the varying schemes and provisions that have yet to be decided, the EU must agree on a cap. The critical problem, however, is that there is a shortage of energy, and time is running out before cold weather sets in. Something needs to be done.
  • Narrative B, as provided by Politico. A price cap on gas is expensive, and subsidizing even a slice of Europe's current gas consumption would cost hundreds of billions of euros, which could leave the EU drowning in debt. Another problem is if the EU sets the price cap too low, global suppliers who can afford to sell elsewhere will do so, likely resulting in a bloc-wide shortage.

Predictions