Europe introduces a gas “ceiling”: what will be the losses of the parties

EU countries lose supplier, Russia – energy market

European energy ministers have made the last attempt this year to agree on the marginal exchange quotations for natural gas. The main topic of the agenda of their meeting on December 19 was the proposal of the Czech Republic, which currently chairs the EU, to reduce the limit to 188 euros per MW per hour (about $2,100 per thousand cubic meters). Russia, as well as other producers of “blue fuel”, warns that the imposition of restrictions on the cost of raw materials will result in market destabilization, price promotion and a shortage of energy resources.

The price “ceiling” of 188 euros per MWh has already become the third option for limiting the cost of gas, considered by the countries of the continent. According to the Minister of Energy of Greece Kostas Skrekas, it is precisely such a cap tariff that “will give the right signal to the markets.” Initially, at the suggestion of Brussels, the limit was to be 275 euros (about $3,000 per thousand cubic meters), but far from all EU members were satisfied with this level. A coalition of 12 countries considered it unacceptable for their economy and demanded that the bar be lowered to 220 euros ($2,400). True, even such a mark caused heated debate among European countries, so the previous meeting of energy ministers was actually disrupted.

At the time of writing this article, the last meeting of the heads of EU energy departments this year, dedicated to limiting the exchange value of “blue fuel”, has not yet ended. Meanwhile, Hungarian Foreign Minister Péter Szijjártó suggested that a ceiling on gas prices would still be set, although such a move would be “wrong, harmful and even dangerous for the European economy.”

Russia maintains an extremely negative attitude towards limiting gas prices. Shortly before the meeting of European ministers, Ambassador-at-Large of the Ministry of Foreign Affairs Yuri Sentyurin said that the “crazy ideas” of the EU would lead to destabilization of the market situation. It is characteristic that this opinion is shared by Bloomberg analysts, according to which the refusal to buy gas from our country has already cost Europe $1 trillion. “This is just the beginning of the deepest energy crisis in decades. After winter, the continent’s underground storage facilities will be empty. Under the conditions of minimal supplies of Russian fuel, it will be difficult to fill them, and problems with LNG supplies to Europe will last until 2026, ”the experts of the American agency believe, warning that in the event of a rise in prices above $ 2,000 per thousand cubic meters, Europe will no longer face a recession, which implies a moderate slowdown in development, but with a full-blown economic downturn. In this regard, the reservation of the European Commissioner for Energy Kadri Simson, who arrived at the ministerial meeting, said that the introduction of the ceiling “will make the EU less stable in the face of Russia” looks funny.

However, complications in resolving energy issues for European states may arise not only with our country, but also with other major gas suppliers. Norway, which has become the main exporter of “blue fuel” to the continent’s market after the reduction in supplies from Russia, also does not see much point in limiting commodity prices, believing that the limits will lead to disruptions in the energy industry and reduce the competitiveness of the EU economy. Qatar, which supplies Europeans with liquefied fuel, even threatened to completely stop the export of hydrocarbons if the “ceiling” is approved.

The opportunity to apply price limits in practice in the European Union will fall out only next year. Now gas quotes are in the region of $1200-1300 per thousand cubic meters, which is far from the limit and quite suits Russia. In December last year, after record highs, the cost of a thousand cubic meters fell below $800. Therefore, according to Natalya Milchakova, a leading analyst at Freedom Finance Global, catastrophic damage from manual regulation of the European commodity market should not be expected. Our country will experience much more sensitive losses not from the price “ceiling”, but from the reduction of foreign supplies of “blue fuel”. As Deputy Prime Minister Alexander Novak said earlier, in 2022, Russian gas exports to EU consumers will decrease by 50 billion cubic meters. Shipment of energy resources to Chinese buyers, which is now reaching the maximum values ​​in the entire history, cannot yet offset the loss by our country of most of the Western market. And it will not be possible to completely redirect supplies to the Asian region soon, since the additional gas pipeline, which Russia is going to continue to the Middle Kingdom, will not be completed until 2030.