EU tells countries gas price cap would come with risks

By Kate Abnett

BRUSSELS (Reuters) -The European Commission has warned EU countries that a broad cap on gas prices could be complex to launch and pose risks to energy security, amid calls from countries for Brussels to step in to tame high fuel prices.

The Commission shared a document with countries on Wednesday, analysing various options the EU could consider to curb high gas prices, after 15 of the bloc’s 27 member states this week urged the EU to propose a cap on gas prices.

The document, seen by Reuters, said launching a wholesale price cap for all exchange transactions – covering both liquefied natural gas and pipeline supplies – could compromise cross border flows of gas between EU countries.

In a supply shortage, multiple countries might hit the gas price cap, meaning price signals would no longer help drive flows to regions where demand is high or supply scarce, the Commission said. It suggested such a price cap could therefore only work if a new entity was launched to allocate and ship scarce fuel supplies between different countries.

If the EU capped gas prices, it would also need to find “significant financial resources” to ensure countries could keep attracting gas supplies from competitive global markets where other buyers may be willing to pay prices above the EU cap, the Commission said. It did not specify where such resources could come from.

“The risk of triggering supply disruptions from third-countries supplies is higher for a generalised wholesale price cap than it is for a price cap on the imports of pipeline gas,” the document added.

EU countries disagree on whether a gas price would help or hinder efforts to ease the supply crunch that has gripped Europe after Russia slashed the gas supplies it sends to EU countries.

France, Italy, Spain, Poland and 11 other countries urged the Commission on Tuesday to propose a price cap on all wholesale gas transactions to help rein in surging inflation. Germany, the Netherlands and Denmark are among those opposed.

Discussions on possible price caps will continue at a Friday meeting of EU energy ministers, who are also set to approve a package of measures proposed by Brussels last week, including windfall profit taxes on energy firms.

(Reporting by Kate Abnett; Editing by Charlotte Van Campenhout and David Evans)