EU price ceiling for Russian gas turned out to be decorative

The published cost limits will allow Russia not to feel them in practice

The European Commission has decided on the concept of a “price ceiling” for gas, the discussion of which began in the EU in the summer. She proposed limiting the cost of fuel to around $3,000 per 1,000 cubic meters. This ceiling applies not only to Russia, which is under sanctions, but also to all gas suppliers to the continent.

This “forced decision” has drawn criticism in Europe itself, because it is more than twice the current gas price, although below the peak levels at which it was in the summer.

The price ceiling for blue fuel is planned to be introduced for a period of one calendar year from January 1. Thus, the European authorities want to prevent “greater damage to the economy” of the EU, including from possible problems with the supply of energy resources from Russia. Experts told MK how the EC decision will affect the economy of our country.

The price of natural gas in Europe reached $1,280 per thousand cubic meters after Gazprom’s statements about a possible reduction in supplies through Ukraine. But even this price is 2.3 times less than the gas price ceiling proposed by the EC, which they intend to set at $2,974 per thousand cubic meters.

This restriction should be introduced for a period of one year for futures (the so-called contracts between the buyer and the seller for the delivery in the future of an asset, the price of which they set in advance) with settlement next month, which are traded on the Dutch TTF exchange and are a guide for the rest Europe.

So why do we need such a ceiling that does not put pressure on Russia at all, and if it does, then only in some extreme situation?

“The European Commission is introducing a ceiling on gas prices in order, on the one hand, to let the citizens of the EU countries understand that Brussels cares about them and is taking measures to curb the rise in energy prices and inflation,” explains Natalya Milchakova, Leading Analyst at Freedom Finance Global. – On the other hand, the EC has a task not to leave European consumers without gas at all in winter, which is why the price ceiling is so high. If it is lower, for example, by half, then LNG suppliers (and this applies not only to Russia) will leave the European market for others, where prices are higher.” From the point of view of the European Commission, its decision on the ceiling price of $3,000 per thousand cubic meters is quite optimal in order to balance the interests of suppliers and consumers.

“The established gas price limit in the EU is much higher than the current values ​​and is intended to show an upper benchmark for market participants, above which they should not “drive” the price of futures, future supply contracts, and not current prices,” Mark continues the conversation. Goykhman. “The sellers seem to be told: there will be no point in such a price, since real sales cannot be made at it.” In this case, it is likely that when this level is broken, market sales of futures will begin, and the price will begin to fall. And spot, that is, the current prices of real supplies, will not exceed this level, which is what the EC wants to achieve. This is a kind of “suspended ceiling”, as in the room, the upper limit for the look, in many ways this “decorative”. Only instead of some kind of drawing for beauty, this figure is “drawn” on it – about $ 3,000 per thousand cubic meters. This is a very unlikely level, but it cannot be ruled out.

Moreover, unlike the ceiling on oil prices, this is not about Russian sellers, but about a principled position for everyone. There are no sanctions: nothing personal, just business. There is another fundamental difference from the oil ceiling, which is expected to be set by the G7 for Russian oil at $60-70 per barrel. For oil, such levels may be lower than the current prices for our Urals crude oil, which can become a significant circumstance for buyers and, accordingly, for Russian exporters. For gas, a similar situation now, in the event of the introduction of a ceiling, will practically not affect the market, prices and supply volumes, the expert emphasized.