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Bloomberg | EU Weighs Gas [EMBARGO] Price Caps and Benchmarks to COMBAT ["shrinking"] Russian Squeeze, 5 Sep Macron Monday hot cake
The European Union is weighing new gas benchmarks and price caps as Moscow's tightening supply squeeze forces the 27-nation bloc to assess drastic measures to curb spiking energy costs.
As part of preparations for the gathering, the European Commission is also assessing options to subject the Dutch Title Transfer Facility -- the virtual gas marketplace whose main index is used for long-term contracts in Europe -- to financial supervision to avoid speculation, according to internal EU documents seen by Bloomberg News on Monday.
build back better merit order
"The price premium [op margin, net profit] between the TTF and Europe's LNG delivered ex-ship < wipes tears > indices has widened significantly bringing up questions about its representativeness as an index for linking the contracts in the whole EU-27," the commission said in the document.
As a last resort in case of supply disruption in Europe, the EU could also explore temporarily pegging the TTF to the JKM Asian benchmark as a dynamic cap. Yet that would require the use of other hubs or mechanisms to allocate gas inside Europe, the commission said in the document on benchmarks for The Wholesale Gas Market.
buh-bye OPEC. buh-bye Brent. buh-bye WTI
"In this situation, JKM would become The World Price for international gas for some time," the commission said. "The Wholesale mMarket would be therefore determined by LNG supply/demand, and not by the EU's internal bottlenecks. < wipes tears > LNG would still be attracted by the fact transport costs ["a few euros"] are lower to the EU."
< wipes tears >
In the document, the commission stressed that while Russia has already sharply reduced shipments to the EU, this option should only be considered if the bloc is ready to accept a full disruption.

"The price cap should be designed in a way that Russia finds itself worse off under a gas delivery stop than complying with the price cap," the commission said in the document. "Given that in the previous decade (2010/2020), prices of Russian gas have settled between 5 euros and 35 euros/MWh, any cap above that level would ensure that Russia would be above its marginal production costs."

EC | EU-U.S. LNG TRADE a/o Jan 2022
"Europe is currently importing around 90% of the gas it needs [...] Since the meeting of US and EU Commission Presidents in 2018, U.S. LNG exports into Europe increased by 2240%.[...]The fact is that U.S. LNG, if priced competitively, can play an important role in EU gas supply, enhancing diversification and EU energy security."
by Cat on Wed Sep 7th, 2022 at 09:11:43 PM EST
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