As Putin's Gas Cuts Fuel Energy Crisis, EU Takes Emergency Actions

As Putin's Gas Cuts Fuel Energy Crisis, EU Takes Emergency Actions

The European Union has agreed to go ahead with a set of emergency actions to tackle the bloc’s energy crisis, with Germany finally yielding to pressure from its peers to pave the way for a temporary price cap on natural gas.

What Happened: Following intense negotiations, the leaders asked the EU’s executive arm to call for a “temporary dynamic price corridor on natural gas transactions to immediately limit episodes of excessive gas prices,” a Bloomberg report said.

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They have called for a temporary EU framework to cap the price of gas in electricity generation, including a cost and benefit analysis, without modifying the merit order while preventing increasing gas consumption.

As Europe struggles with an energy crisis due to Vladimir Putin-led Russia’s progressive reduction of gas flow, the region is increasingly looking at alternative sources that include LNG.

The Global X MLP & Energy Infrastructure ETF MLPX has gained over 10% since the beginning of the year while the Vanguard Energy Index Fund ETF VDE is up over 42% in the same period.

Another proposal included a call for voluntary joint purchasing of gas, except for binding demand aggregation for a volume equivalent to 15% of storage filling needs, according to national needs.

The group has also proposed speeding up negotiations with reliable partners to seek mutually beneficial partnerships by exploiting the Union’s collective market weight and making full use of the EU Energy Platform.

According to the report, European Commission President Ursula von der Leyen said at a news conference, “We will develop a complementary new index to reflect better the LNG price situation and for the meantime we will establish a market correction mechanism to limit episodes of excessive gas prices.”

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