EU Commission says gas price cap 'impossible'

© Dado Ruvic, Reuters

The European Union's executive told its 27 member countries at a seminar on Monday that it was not possible to create a gas price cap that would not affect long-term contracts or supply security, two diplomatic sources told Reuters.

After much wrangling at an all-night summit, EU leaders agreed last month to task the executive European Commission with proposing a temporary EU framework to cap gas prices in electricity generation and create a temporary natural gas transaction price corridor to bring down costs for consumers.

But a compromise between those like France, Spain and Belgium that want a cap, and the German-led camp opposing it meant additional conditions were attached, namely that any cap could not affect long-term contracts, lead to an increase in gas consumption or provoke producers to reroute supplies elsewhere.

"Now, the Commission has said it's impossible to have a cap that meets these criteria," said one of the diplomats, adding national envoys of the 27 EU member countries to the bloc's hub Brussels would discuss that next on Friday.

"There will be a lot of emotions flying high."

The matter has divided EU countries for months as they look to address an acute energy crunch that is driving record-high inflation and threatening recession in the bloc.

The second diplomat said the Commission instead offered a voluntary "market correction mechanism" that did not go far enough for countries demanding a cap to instantly limit price spikes. The diplomats did not provide details on how the mechanism would work.


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