The European Union is considering emergency relief measures in the wake of the energy price spike amid the Middle East war, including capping the price of natural gas, European Commission President Ursula von der Leyen said on Wednesday.
The price spike in oil and gas prices during the ten days of war have already cost the European taxpayer an additional 3 billion euros, or $3.5 billion, in fossil fuel imports, von der Leyen told the European Parliament today.
“Households and companies face pressure now. So we must deliver relief now,” the top EU official said.
It is crucial that the European Commission reduce the cost impact, when gas sets the electricity price, she added.
“We are preparing different options—better use of Purchase Power Agreements and contracts for difference, state aid measures, and we are exploring subsidizing or even capping the gas price,” von der Leyen said.
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In 2022, the EU put into place an emergency cap on gas prices following the Russian invasion of Ukraine and the halt to Russian pipeline gas supply to most European countries. That cap has never been triggered, though.
European benchmark gas prices have soared to a nearly three-year high since Qatar announced it is halting LNG production at Ras Laffan, the world’s biggest liquefaction complex, issued force majeure notices to customers, and the Strait of Hormuz became inaccessible for tanker traffic.
Last week, the European gas price soared by 67% for the steepest weekly gain since the energy crisis of 2022, as the Strait of Hormuz, through which 20% of global LNG flows pass, is effectively closed for traffic.
With 20% of global LNG flows out of the market for weeks, at best, Europe began losing the competition for spot supply with Asia.
Asia is attracting most flexible-destination LNG cargoes away from Europe amid renewed competition for supply. A growing number of LNG cargoes that were initially en route to Europe have sharply diverted in the Atlantic toward Asia via the Cape of Good Hope.
By Tsvetana Paraskova for Oilprice.com
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