EU Mulling Gas Price Cap

EU leaders are deliberating instituting a cap on natural gas prices, which have been surging recently, the Financial Times reported on Wednesday.

Industry groups, however, have cautioned that such a measure could disrupt market stability and the security of supply.

In recent weeks, gas prices in the EU have soared, with the Dutch Title Transfer Facility (TTF), the European benchmark, hitting a two-year high of €59 ($61) per megawatt-hour on Tuesday. This has been attributed to a spate of cold weather, reduced renewable energy output, and supply concerns.

During the 2022 energy crisis, the EU introduced a price cap mechanism with a TTF target of €180 per megawatt-hour, but it never kicked in before expiring this year. In a report this past September on EU competitiveness, former European Central Bank President Mario Draghi proposed a “dynamic cap,” which he argued could discourage speculation in the spot market. He said such a mechanism could be used when EU energy prices diverge significantly from global rates.