The EU Is Considering Capping Gas Prices

Authored by Tsvetana Paraskova via OilPrice.com,

Italy’s idea that the EU impose a cap on natural gas prices has emerged as the “only sustainable solution” to soaring energy prices, Italian Energy Transition Minister Roberto Cingolani said at an energy conference in Rome on Tuesday.

Weeks ago, Italy proposed to the other EU member states that they place a cap on the price of gas in order to tame soaring inflation and skyrocketing energy prices in the 27-member bloc. Other EU countries have expressed doubts that a price cap would work.

At the end of May, Italy’s Prime Minister Mario Draghi said that the European Commission would look into setting a price cap on imported Russian natural gas.

Speaking at the conference today, minister Cingolani said that “the proposal of a cap on prices has gradually emerged as the only sustainable solution.”

“We need to avoid a scenario in which someone wakes up one morning and sets a crazy price,” Cingolani said, adding that he believed Italy would get something in terms of a cap on gas prices at the discussions within the EU.

The European Commission is currently discussing the idea, the minister said.

Claudio Descalzi, the chief executive of Italy’s energy major Eni – which today flagged a seventh day of reduced supply from Gazprom – wrote in a LinkedIn post on Monday that it is important that Europe adopt the Italian proposal to set a cap on gas prices. This would send a strong message to speculators and would bring prices back to a level that would allow more injection into gas storage, Descalzi said.  

Faced with the possibility of zero Russian gas, Italy will not be able to completely replace that gas, but reaching a gas storage level of 70-80% by the winter and with measures taken by the government, the country will manage next winter, Eni’s CEO added. For the winter after that, Italy will be 80% independent from Russia, thanks to non-Russian gas supply Eni has recently negotiated, Descalzi said.   

Before the Russian invasion of Ukraine, Italy sourced from Russia around 40% of the gas it consumed.