Worries are mounting that the Israel-Palestine conflict and the suspected sabotage of a Baltic pipeline could drive gas prices higher
The EU could prolong the emergency gas price cap introduced last winter to avoid a new price spike, the Financial Times reported on Sunday, citing diplomats.
According to the report, despite the recent decline in energy prices and high gas storage levels, Brussels is concerned that gas supply could still be at risk during the heating season due to the Israel-Palestine conflict.
“We don’t know what will happen this year. We have the situation in Israel and we don’t know how that will affect imports from the Middle East,” one EU diplomat told the news outlet. Many analysts warn that any escalation of the conflict could cause a surge in gas prices.
There are also fears of potential acts of sabotage to gas infrastructure, especially after the recent leak at the Balticconnector pipeline. The undersea gas pipe connecting Finland and Estonia was shut down earlier this month and is believed to have been damaged deliberately. One source told FT that in light of that incident “it would be good to have an insurance policy” in case other infrastructure suffers a similar fate.
According to the report, ten EU member states, including Germany and Austria, have appealed to the European Commission in a letter this weekend asking to extend the emergency measures introduced during the energy crisis last winter, when gas prices in the bloc reached more than €300 per megawatt-hour. One of these measures included a “market correction mechanism,” which would cap the market price of gas at €180 per megawatt-hour if gas futures trade at a higher level for three consecutive days.
While the price cap had many opponents at the time, arguing that it would distort markets, the European Commission saw “no indication of negative effects” since it took effect, with gas prices now nearly 90% lower than last year. The cap, however, is due to expire in January 2024.
Among other measures proposed for extension are emergency regulations that allowed EU countries to accelerate certification of new wind farms and solar power parks, and ease state aid rules for renewables projects.
Germany and France have reportedly also asked the European Commission to extend emergency rules that allowed member states to provide subsidies to consumers facing high energy prices. However, Belgium, the Netherlands, Denmark, Estonia, and Finland have been opposing the move, saying there was “neither the need, nor the legal basis” to prolong the legislation.
The European Commission is expected to announce which of the emergency measures it considers worthy of extension next month.
For more stories on economy & finance visit RT’s business section