With the arrival of winter, Europe fixes a maximum price at which it will purchase gas

The European Union is turning the traditional way of functioning of world hydrocarbon markets upside down like a sock. For the first time in history the importer and not the exporter will set the price. Europeans believe that their role in the international gas market is so important that they can force the hand of exporters.

The 27 energy ministers of the European Union approved this Monday a mechanism to prevent, as in August, they have to pay historical figures for imported gaswhich exceeded 350 euros per MWh in the Dutch TTF futures market, the benchmark in Europe.

If prices skyrocket again and the new tool is activated (it will take three consecutive days with gas marking above 180 euros per MWh and at the same time 35 euros above the international average price), Europeans will pay only those 180 euros or, if those 180 euros are lower than the international average price, that international average price plus 35 euros.

Those additional 35 euros are considered a guarantee to prevent the LNG tankers from taking other directions.

the deal

The pact to create this tool, known as “market correction mechanism”It took months. Since last summer, the energy ministers of the 27 had met six times, always ending up leaving it for another day. Anger was fat. The majority of member states wanted to set a maximum price at which Europe would pay for imported gas.

Germany, Austria and the Netherlands refused because, they said, it would put the supply at risk. If a price were fixed and more gas was paid in other markets, exporters would forget about Europe and LNG carriers would go to Asia.

Neither the correction mechanisms nor the safeguards to avoid this deviation mattered. Every meeting ends the same way with the German NEIN backed by the Dutch and Austrians.

Autumn arrives and Germany begins to give way, but it seems more to keep the forms than conviction. The 27 then entrusted the European Commission with a formal proposal. Energy Commissioner Kadri Simson, who had been saying for weeks that such an idea was unfeasible, had to give in. But only the tip.

Simson, with Ursula Von der Leyen of Germany and Frans Timmermans of the Netherlands looking over his shoulder, has proposed a virtually useless mechanism. “at ease”, in Rivera’s words.

The proposal of the European Commission envisaged that the cap could be activated only if the gas in the Dutch futures market, the reference TTF in Europe, exceeded 275 euros per MWh for 14 consecutive days. An impossible.

talks

Simson’s proposal, which many governments took as an affront, had the opposite effect: the six-month Czech presidency shelved the papers of the European Commission and He presented his proposal two weeks ago.

Last week’s meeting opened a window. Germany gave in. Holland, Hungary and Austria do not constitute a blocking minority sufficient to avoid the agreement, so by now it was known that there would be a gas cap and the only thing missing was the most political detail, the fixing of the price.

Last Thursday’s European summit gave the order to end the game and asked ministers to do so “finalize” the negotiation”. Everything was ready for this Monday.

After less than eight hours of negotiations, 24 Member States voted in favor of the mechanism, which provides for its activation when the price of gas in the FTT exceeds 180 euros for three consecutive days.

A substantial reduction compared to the European Commission’s proposal, which makes its activation less unlikely and which, for example, would have served last August, when Europeans saw how gas prices had a second-round effect that triggered the ‘inflation.

At the time of the vote, Germany joined the majority, Austria and the Netherlands abstained and only Hungary voted against.

PB extension