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21st Jan 2022

EU calls for end to gas price speculation

  • Some MEPs pushed European Commission to “have courage” and totally exclude market forces from the equation. (Photo: jiva)
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The EU has called for an end to gas and energy price speculation, amid market fears.

"We must end speculation on the energy markets, that is why we are we are increasing our monitoring of the gas and energy markets," European Commission president Ursula von der Leyen told the European Parliament in Strasbourg on Wednesday (20 October).

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The commission will present a revamped EU gas and energy policy in December 2021, but is still unsure how far to go to curb speculation.

EU lawmakers have so far resisted calls to limit financial involvement in the gas and energy markets, warning that intervening would undermine confidence in the market, revealing speculator dominance in gas-market considerations.

Some MEPs pushed the European Commission to "have courage" and totally exclude market forces from the equation.

"We have to end this market-based system where surging prices means speculators and shareholders earn even more money while regular people foot the bill," Manon Aubry (French co-chair of the Left Group) told von der Leyen.

Member states will debate the issue at the EU summit on Thursday and Friday.

A growing chorus of countries seeks EU action to curb speculation on the gas and energy markets in recent weeks.

Spain urged the commission to block certain operators from trading in the EU carbon market, especially "speculators with market power."

Claude Turmes, the energy minister of Luxembourg, has recently said the EU's market reform was "an opportunity to crack down on speculators."

To prevent excessive speculation, he proposed a minimum of hedging for all "market participants", which forces them to fix their investments, increasing price stability.

Random events

Gas prices briefly reached €118 per megawatt hour on the Dutch TTF markets this month, the most important trading hub for gas in Europe - a price increase of 800 percent since March, when prices were hovering around €15.

Traders attributed the price rise to various factors, such as weaker Russian gas flows into Europe, changing temperature forecasts in Northwest Europe, weak winds over the summer and speculative trading.

Prices have now stabilised at a somewhat lower level - around €90 - following mild weather forecasts, showing gas and energy prices are subject to random events and market forces, rather than a result of policy choice.

Some traders implied price fluctuations are almost entirely caused by speculative trading on the TTF markets.

"TTF is the reason for [price] volatility in [the] Asia and Atlantic [markets] as LNG fundamentals have remained quite stable this month," a Singapore-based LNG trader told S&P Global, a business and financial analytics company. "It is impossible to say why prices are rising or falling."

Executive director of the International Energy Agency Fatih Birol recently told business leaders and lawmakers that "recent increases in global natural gas prices are the result of multiple factors, and it is inaccurate and misleading to lay the responsibility at the door of the clean energy transition."

Boosting market confidence, von der Leyen impressed upon lawmakers that the best medium and long term solution to fluctuating energy prices is to increase investments in renewable energy.

"The European Green Deal is in the mid- and long-term a pillar of European energy sovereignty in the 21st century," she said.

Gas price spike exposes rift at EU summit

The first topic leaders discussed at the EU summit were the continent's soaring gas prices, which have lead to a spike in household energy bills - amid widespread disagreement on how to solve the issue.

Nine countries oppose EU gas market reform

Germany, the Netherlands and Denmark and six other countries have signed a letter saying they cannot back any reform of the EU gas and energy markets.

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