From the G7 Russian oil price cap to the EU gas tightening hypothesis
(Sustainabilityenvironment.com) – The word of the moment in the field of energy? Price cap. Literally “price limit”. The price of what? Oil according to the final statement of the G7 Finance. The Ministers of Canada, France, Germany, Japan, Italy, the United Kingdom and the United States have agreed at this time to introduce a price cap on Russian crude oil purchases in order to limit the Kremlin’s export earnings. The extent of the cap is not yet known, but the German Finance Minister, Christian Lindner, would like to point out that the action will cross the boundaries of the intergovernmental forum. “On the roof at the price of oil, we want to build a broad coalition, beyond the G7,” said Linder. “We want to convince all EU countries and beyond”.
The summit can, of course, count on the EU Executive, which, in the words of its Commissioner for Economic and Monetary Affairs, Paolo Gentiloni, says that it is ready to “work towards achieving unanimity among the 27 Member States in order to implement this measure in the EU”. “Our objective – said Gentiloni on the sidelines of the G7 meeting – is to do so in line with the timetable agreed under the sixth package of EU sanctions, namely 5 December 2022 for crude oil and 5 February 2023 for petroleum products”.
Read also What has the G7 decided on the Russian oil embargo?
But another price cap could hit Moscow’s energy. Speaking in the margins of a meeting in Germany, the President of the European Commission, Ursula von der Leyen, opened up the possibility of introducing a ceiling in the gas sector as well. “Putin prefers to burn the gas rather than deliver it under contracts to Europe or other regions,” said von der Leyen. “I firmly believe that the time has come to set a maximum price for Russian gas arriving in Europe”. A statement that was welcomed by two immediate reactions: the angry Moscow one that, through the Vice-President of the Security Council of the Russian Federation Dmitry Medvedev, threatened the complete closure of the pipelines; and the financial market with a brief rise in the futures on the Amsterdam market.
In fact, the price cap on Russian gas is, at least for now, just one of several hypotheses studied by Brussels to counter the expensive energy. “There is also a legal basis at the European level to temporarily skim profits as an emergency measure at a time of crisis,” she added. The idea, also reflected in a draft unofficial document seen by Reuters, is to include a cap on electricity prices in the next package of EU measures. The intervention would only apply to infra-marginal electricity production technologies, such as wind, photovoltaic, nuclear and lignite-fired thermoelectric. The executive would also be considering measures to reduce electricity demand, through dedicated remuneration for businesses and consumers.
