(Bloomberg) — Europe’s biggest energy producers and traders warned the European Commission against introducing a gas price cap as a tool during times of crisis, after some officials raised the idea in recent months.
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The idea of a cap is opposed by most member states, according to people familiar with the matter, but the industry raised concerns as the European Union’s executive arm discusses a plan to be unveiled on Feb. 26 to boost industrial competitiveness and ensure affordable energy. Gas prices have more than doubled in the past 12 months and soared to a two-year high earlier this week amid concerns about depleting storage.
The idea of a price cap was raised previously by former European Central Bank President Mario Draghi in his report last year on competitiveness. It has been flagged by certain officials as as a potential measure that could be used in the event of a crisis, said the people, who asked not to be identified commenting on private talks.
The industry’s opposition was conveyed in a letter addressed to Commission President Ursula von der Leyen and signed by 11 associations, including oil and gas producers, energy traders, clearing houses and energy exchanges.
“We believe this measure, if announced, could have far-reaching negative consequences for the stability of European energy markets and the security of supply across the continent,” they wrote. “A price cap does not decrease the global market price of energy, but may create upward price pressure and increased price volatility in Europe,” the letter said.
The European Commission declined to comment.
Energy prices have dropped significantly from the peaks of the energy crisis but still remain stubbornly high. Von der Leyen has set lowering energy prices and boosting industrial competitiveness as a political priority for the commission during her second term in office.
European gas prices have soared as a colder winter combines with lower volumes from Russia to deplete inventories at the fastest pace in years. The prospect of increased demand this year to refill reserves during warmer months means prices for spring and summer gas have surged to an unusual premium over next winter. Benchmark futures are up 16% this year to €56.70 a megawatt-hour.
The rally has reignited anxiety around higher energy prices and affordability for consumers that was first unleashed in the aftermath of Russia’s invasion of Ukraine.
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