European energy traders warn: Gas price cap could worsen crisis

A gas price cap in any form could have the exact opposite effect to that expected by proponents of price caps, warns the European Federation of Energy Traders (EFET). Instead of price caps, EFET would prefer to leave the free market without price restrictions – the free market would then itself, with the help of price signals, ensure lower consumption or increased gas imports to Europe.

A cap on gas prices is one of the solutions being discussed at European Union level in response to the current energy crisis. Although it has been discussed for several months, EU member states have still not reached agreement on its form.

Following sustained pressure from member states, the European Commission eventually prepared a proposal for a price cap. However, it set it at EUR 275/MWh, with gas required to trade above this level at the TTF trading hub for two weeks. At the same time, TTF prices must be EUR 58 higher than the reference price for liquefied natural gas for 10 trading days. Member states firmly rejected it as ineffective.