Freezing in the middle of winter: Europe decided to limit gas prices
The European Commission is thinking about limiting gas prices in the EU as part of the "clean industry deal". The return to the idea, which was preached by former ECB head Mario Draghi, came against the backdrop of the highest gas prices in two years, which arose due to disruptions in supplies of Russian blue fuel, and a cold winter. The step is aimed at supporting the economic bloc's industry, which has been in a severe depression for months. Experts believe that the idea is unlikely to succeed, as it is not clear who will pay for such practices. Details - in the material "Izvestia".
Close to catastrophe
Since the beginning of the year, gas prices in Europe have risen by 16%, according to the London-based ICE exchange. This week they passed $620 per thousand cubic meters - the maximum level since 2023.
The cost was affected by several factors at once. First, liquefied natural gas (LNG) supplies were unable to replace the interrupted transit of Russian gas through Ukraine. Second, the air temperature in January 2025 was significantly lower than in recent years, although not much lower than normal.
As a result, storage facilities were less than 48% full, which is very low for January. Europe should survive the current winter without any major problems, unless there are severe force majeure events like weeks of frost in March-April. But filling underground storage facilities for next year may be a problem, as prices will remain high for a long time.
According to the European Commission's version, the solution may be a price ceiling, and the authority to regulate prices may be transferred to one of the EC bodies.
The idea is not new: it was first put forward last year by former ECB head Mario Draghi. In his report, he warned, among other things, that under the new conditions, the competitiveness of the European industry would be undermined, as prices would be many times higher than those of competitors. The report referred to comparisons with the US and other countries.
Interestingly, today natural gas in America at the Henry Hub is almost four times cheaper than on the EU spot market.
The EU first proposed a similar price ceiling in 2022, at the height of the bloc's energy crisis, following sanctions against Russia and cuts in fuel supplies. But the project was never implemented, as prices remained below the benchmark of €180 per megawatt-hour (almost €1,800 per 1,000 cubic meters). Note that the current ceiling is likely to be noticeably lower.
For the EU, high prices have proved disastrous. Some industries in Germany have come to a complete halt. Business activity in the industry of this country has been declining for about 30 months.
All this has had an impact even on the broad measure of GDP, which has fallen in Germany for two years in a row - the first time since the early 2000s and the second time since the end of World War II.
Clean industry
A price ceiling could be introduced as part of discussions on a "clean industry deal", a strategic policy document due next month, The Financial Times reported.
It will set out ways of increasingly urgent support for EU heavy industry. It's not just gas and other fuel prices: businesses face a host of challenges, including aggressive trade measures by US President Donald Trump and the EU's own ambitious plans to move to a green economy.
Senior EU officials say the draft will also include measures to prevent traders from artificially inflating gas prices in the summer, when European countries stock up on fuel. At the same time, the EU recognizes that some members of the association will not be happy with such tough measures. For example, Germany and the Netherlands spoke out against the previous ceiling and will obviously protest even more actively this time.
The initial reaction of the business community to the rumors of a price freeze was sharply negative. Eleven financial and industrial groups warned against damaging "confidence" in the European market. On February 11, they sent a letter to European Commission President Ursula von der Leyen.
The signatories included the Association of European Energy Exchanges Europex and financial markets lobby group AFME. The industrialists note that the introduction of a gas price ceiling will "undermine confidence" in the European benchmark Title Transfer Facility (TTF), the same Dutch hub where the spot price for Europe is calculated.
The letter emphasizes that the decision "would encourage the global gas community to switch to other, unrestricted and therefore more representative benchmark prices, which are mostly outside the EU."
The main problem with implementing such measures is that the EU produces very little of its own gas. Accordingly, there is no way to influence producers in any way.
The costs of the ceiling will fall on the EU budgets - and ultimately on the budgets of the countries that are members of the EU. Under certain circumstances, we could be talking about tens of billions of euros a year, which is beyond the capacity of the current EU, which is already experiencing problems with growing budget deficits.
Imitation of turbulent activity
Analysts say the EU will have to focus on stockpiling energy rather than regulating prices. Setting a ceiling on wholesale prices will not help in any way when the main difficulty is shortages of fuels of all kinds.
The EU is trying to reduce energy costs during the transition to a cleaner economy and keep up with the growth of the US and Chinese economies, but it is limited in the short term. That said, Europe is engaged in a race to secure energy supplies, and finding the right balance between low prices and securing enough gas will be a challenge.
The drop in gas consumption observed in recent years was in fact the effect of de facto de-industrialization, especially in the most vulnerable countries, such as Germany.
According to Finam analyst Sergey Kaufman, if a ceiling is introduced, it will have no practical effect.
- Rather, it may be a symbolic gesture, which is designed to show voters the rapid activity on the part of the EC, - says the analyst. According to him, at the moment the increased gas prices in the EU are a mechanism to attract free LNG volumes to replenish the melting gas reserves in UGS.
- If a hard ceiling is introduced, i.e. close to market prices, suppliers will not be motivated to redirect free volumes from the Asia-Pacific market to the EU market. Such a measure may spoil relations with key suppliers, for example, the United States," the expert explains. As a result, the introduction of a ceiling at prices close to market prices is highly unlikely.
According to Tamara Safonova, Associate Professor at the Institute of Economics, Mathematics and Information Technologies of the Presidential Academy, in the current situation, when the European Union is reaping the benefits of refusal from Russian energy resources, gas price limits for other world exporters will lead to a reduction in gas supplies in the European direction from other countries.
- Falsification of dynamic pricing systems by limiting fuel prices is also a pressure aimed at distorting the price environment of the global gas market and contradicts the market mechanisms that have been built up over decades," Tamara Safonova explains.
At the moment the problem has lost a little of its acuteness. Gas prices have fallen by almost 10% over the last 24 hours amid progress in the peace settlement on Ukraine. Thus, a lasting peace in the region could remove the issue of emergency price controls and ease the EU's energy crisis.
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