The EU cannot afford cheap gas

In addition to the oil issue, European leaders at the big EU summit, which is taking place these days in Brussels, cautiously touched on an even more sensitive topic - gas supplies and limiting prices for raw materials. Last autumn and winter showed that an uncontrolled free energy market can be very unpredictable, characterized by an avalanche-like increase in the cost of an important product. Therefore, Italy's proposal to limit (set a ceiling) gas prices was received with enthusiasm by the European states, however, most likely, this issue will not be accepted at the summit. The European Commissioner for the economy Paolo Gentiloni quoted by Reuters.

As planned, in order for all countries to agree to accept a conditional price ceiling for natural gas as a basis, the initiative was accompanied by an explanatory note, which indicated restrictions on Russian gas. However, in general, the legislative norm applied in general to any blue fuel coming to Europe.
The leaders of some countries supported Italy's request, but most of the EU member states were skeptical about the possibility of forcibly capping prices. Moreover, the arguments of the opponents of the initiative are more than convincing.



First, the artificial limitation of the price of the already cheap (compared to spot trading and LNG) Russian gas will make it economically uncontested. Just the free liberal market of the EU, however, as in any other region of the world, ceteris paribus, will always make a choice in favor of a cheap product. Therefore, by such a decision, the EC will not only not reduce dependence on Russian fuel, but, on the contrary, will increase it. The reverse effect of the measure is guaranteed.

Secondly, an attempt to impose a price ceiling on all natural raw materials imported to the continent will have an even more negative impact on the European energy market. Obviously, with such intervention in the private sector, most of the imported "mobile" gas (of course, LNG) will instantly go to Asia, which will gladly buy up all the volumes. Liquefied gas cannot be cheap in principle, and therefore traders and suppliers will not tolerate an artificial underestimation of its cost. In this case, the EU faces a serious shortage and the consequences in the form of a rise in the price of inaccessible gas. Vicious circle.

In other words, Italy's initiative is good only on paper, a beautiful populist move. However, in practice, it would turn into a disaster for Europe, which simply cannot afford cheap gas. Cheap fuel is definitely unprofitable (not competitive) for the EU.