EU gas price cap bad deal for Germany, could damage the whole of Europe – opinion

The vote by EU energy ministers to introduce a price cap on natural gas is a bad compromise for Germany, Anja Stehle wrote in an opinion piece for Die Zeit. The price ceiling, taking effect at 180 euros per megawatt hour and which the German government had rejected almost until the very end, will ultimately hurt European economies by scaring sellers away from the region, she said. While the price cap comes with a number of conditions, including a minimum spread with respect to global liquefied natural gas (LNG) prices of 35 euros, Germany’s consent to the policy is likely to only have been given in order to avoid standing alone against its EU partners, Stehle wrote. “The German government fought the price cap for a good reason,” as it regarded gas shortages due to sellers avoiding Europe a possible outcome of the measure. “The tankers with the urgently needed LNG could just ignore Europe and head for ports where buyers are ready to pay more,” Stehle argued. As a newcomer to LNG trading, Germany still lacks solid trading ties in the industry and an intervention like the one decided by EU ministers could make its entry to the market in the energy crisis even more difficult, she said. “This could become a problem especially in spring,” when Germany has to refill its gas storages to get ready for the following winter. “If there is not enough gas available on the market because of the price cap, the 2023 winter will become challenging.”

While it was understandable that other EU countries have little empathy for German concerns after the country pushed up prices with a buying frenzy in summer 2022, following decades of making itself more and more reliant on Russian supplies, a shortage due to the cap would deal damage to the EU as a whole, according to Stehle. “Europe’s energy market is closely interlinked,” she said, pointing out that Germany had supplied France during its ongoing nuclear power shortfall with electricity that partly stems from German gas plants. “If gas becomes scarce in Germany, all of Europe has a problem.”