Setting a ceiling on the price of European gas would do more harm than good, writes LJucca
A pressure gauge is seen at Storengy’s natural gas storage site in Saint-Illiers-la-Ville, western France, September 20, 2022. REUTERS/Christian Hartmann
MILAN, Dec 16 - Setting a ceiling on the price of European gas would do more harm than good. European Union energy ministers will meetto try and agree on the cap, which backers believe will prevent gas prices from spiralling out of control. The reality looks different. Under the latest proposal, the cap may be set at 220 euros per megawatt hour for the most liquid future contracts exchanged at the Dutch Title Transfer Facility, Europe’s gas benchmark. This is well below the 275 euro per MWh ceiling which the European Commission initially proposed. One-month future prices currently trade at 116 euros per MWh .
The level the EU may agree on increases the risk of triggering the cap. Furthermore, capped contracts may be considered more risky, and thus require a larger amount of collateral for gas to be bought and sold. The Intercontinental Exchange, which handles the majority of TTF future contracts, believes the additional cost would be $47 billion.
The biggest risk, however, is that players would simply leave the EU. ICE could move trading to London, while leaving the physical delivery in the Netherlands. It already operates a similar dual arrangement for diesel contracts. Traders could even opt to buy TTF contracts on the Chicago Mercantile Exchange. The EU may still go ahead and impose its cap. But locking the stable door after the horse has bolted would look futile.
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Breakingviews - Breakingviews: Unilever ice cream saga may sour ESG dealsUnilever’s drawn-out ice cream drama offers food for thought on buying companies with strong political leanings. The consumer goods group said on Thursday that its litigation with the independent board of Ben & Jerry’s over the sale of its Israeli ice cream business has “been resolved”. The ending removes a potential headache for the new Unilever chief executive who will take over when current boss Alan Jope steps down next year.
Read more »
Breakingviews - Bond-buying scars will open European can of wormsThe euro zone will soon have to pay for a decade of European Central Bank largesse. Rising interest rates are turning the ECB’s portfolio of bonds acquired since 2014 into a money-losing machine. The question of how those losses are shared could become a major source of tension between member states.
Read more »
European Parliament Corruption Scandal Casts Shadow Over EUEuropean Union leaders are concerned about the fallout from a scandal in the European Parliament, in which lawmakers are suspected of accepting bribes from Qatar
Read more »
Breakingviews - India bank sale sharpens valuation rivalryIndia’s most highly valued banks may soon have a new challenger. The government is finally selling a controlling stake in one of 13 state-backed lenders. Sumitomo Mitsui Financial , Carlyle and Fairfax Financial may each be eyeing some of the 61% stake on offer in $7 billion IDBI Bank , per reports by The Economic Times and Mint. Bidders will be betting private ownership can speed up this turnaround play’s transformation.
Read more »
Breakingviews - China reopening is mixed blessing for inflationChina’s exit from ‘zero Covid’ will bring it back to the top economic table. That will unblock global supply chains, easing price pressures for importers. But it also means increased competition for energy resources, writes guerreraf72
Read more »
Breakingviews - A solo Ticketmaster might attract financial fansThe drums are beating louder for a breakup of Live Nation Entertainment . Its Ticketmaster business, acquired controversially in 2010, recently botched availability to see Taylor Swift and Bad Bunny and in the process stirred up fans, trustbusters and politicians. A split could be sweet music for all, even shareholders.
Read more »