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Is the gas price cap mechanism proposed by the Commission too strict? Madrid call it a ‘joke’

Is the gas price cap mechanism proposed by the Commission too strict? Madrid call it a ‘joke’

The Spanish government on Wednesday accused the European Commission of “pay the head of the world” with a proposal to temporarily cap the price of gas on overly drastic conditions.

“We had asked the European Commission to draw up a proposal and, at the last minute, they presented us with this proposal, which is not a proposal.“, declared to the press the Spanish Minister for the Ecological Transition, Teresa Ribera, describing “joke” the mechanism desired by Brussels.

“What this proposal will generate is the opposite of the intended effect: it will cause a greater increase in prices, jeopardizing all control policies” inflation, continued the Minister, accusing the Commission of “take the head of the world”.

The European Commission proposed on Tuesday a temporary mechanism to cap wholesale prices on the EU’s benchmark gas market, but with very drastic conditions, in order to convince reluctant member states vis-à-vis such a device.

This proposal is “clearly insufficient” and “not going in the right direction”protested Socialist Prime Minister Pedro Sanchez, after a meeting with his Romanian counterpart Nicolae Ciuca in Castellon, eastern Spain.

Madrid will strongly oppose

According to Ms Ribera, the Commission’s proposal raises a “strong indignation among a majority of Member States”. madrid goes to “strongly oppose” to this mechanism at the Thursday meeting of European energy ministers, she warned.

“The Commission is going to hear very harsh things from the vast majority of ministers”she added, calling on Brussels to “make a serious offer”.
“Otherwise we will simply stop supporting the Commission’s proposals on other issues that may be important to it”she warned.

The device unveiled by Brussels consists of capping the prices of monthly contracts on the Dutch reference market TTF for one year. It would be put in place automatically as soon as these prices exceed 275 euros/MWh for two consecutive weeks, and provided that they are at least 58 euros higher than a “average world reference price” liquefied natural gas (LNG) for ten days.

A condition deemed necessary for Europe to remain sufficiently attractive for LNG vessels, which are likely to easily find other customers in Asia. But monthly contracts only exceeded 275 euros/MWh this year during a very brief period at the end of August, peaking at around 350 euros, when the Twenty-Seven were competing to fill their reserves. And prices are currently hovering around 120 euros.

Asked by AFP, a spokeswoman for the Commission confirmed that given the conditions of the mechanism, the latter would not have been triggered during the price spike in August, when the ceiling of 275 euros had only been exceeded for less than two weeks. However, “we have made” this mechanism “to anticipate and prevent this situation from occurring in the future”she clarified.

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