There are concerns within the European Union (EU) that the Israel-Palestine conflict and the suspected sabotage of a Baltic pipeline could lead to a rise in gas prices. As a result, the EU is considering extending the emergency gas price cap that was implemented last winter to prevent a potential price spike.
Despite the recent decrease in energy prices and the storage of high gas levels, Brussels is worried that gas supply could still be at risk during the upcoming heating season due to the ongoing conflict in the Middle East. An EU diplomat stated that the situation in Israel is uncertain, and it is unclear how it will impact gas imports from the region. Analysts have cautioned that any escalation in the conflict could cause a surge in gas prices.
Furthermore, there are anxieties about potential acts of sabotage targeting gas infrastructure, particularly following a recent leak in the Balticconnector pipeline. This undersea gas pipe, connecting Finland and Estonia, was deliberately damaged and had to be shut down. In light of this incident, there is a growing consensus that having an insurance policy to safeguard against similar infrastructure damage would be beneficial.
In response to these concerns, ten EU member states, including Germany and Austria, have written a letter to the European Commission, urging the extension of the emergency measures that were implemented during last winter’s energy crisis. These measures included a “market correction mechanism” that imposed a cap on the market price of gas if gas futures traded at a higher level for three consecutive days.
Although the price cap faced opposition when it was introduced, with critics arguing that it would distort markets, the European Commission has found no indication of negative effects since its implementation. Gas prices have decreased by nearly 90% compared to last year. However, the cap is set to expire in January 2024.
In addition to extending the price cap, Germany and France have also requested the European Commission to extend emergency rules allowing member states to provide subsidies to consumers facing high energy prices. However, Belgium, the Netherlands, Denmark, Estonia, and Finland have opposed this move, stating that there is neither a need nor a legal basis to prolong the legislation.
The European Commission is expected to announce next month which emergency measures it deems worthy of extension. This decision will have a significant impact on gas prices and the stability of energy supply in the EU.
In conclusion, the EU is considering extending the emergency gas price cap due to concerns over the Israel-Palestine conflict and the potential sabotage of gas infrastructure. These issues pose a risk to gas supply and could lead to a rise in gas prices. The decision to extend emergency measures will be crucial in ensuring the stability of energy supply and preventing a potential price spike in the upcoming heating season.