MOSCOW, December 20. /TASS/. It is unlikely that the gas price ceiling introduced by the European Union [about $2,000 per 1,000 cubic meters at the current exchange rate of the euro against the dollar - TASS] will be used in practice, experts questioned by TASS say.
"It seems to me [this measure] will not [work efficiently]. It is designed in a way that the probability of mechanism actuation is low while the likelihood of its urgent termination [if activated] is high. That is, this is just one more example of bureaucratic whitewash. This is like announcing the ceiling but not introducing it at the same time," Deputy Head of the National Energy Security Fund Aleksey Grivach says.
The mechanism may not start working at all when reaching the cap of 180 euro per MWh, head of the Center for Energy Development Kirill Melnikov noted. "It is unclear so far, to what extent the ceiling is fundamentally able to perform its function, because it will not work if the LNG price in Europe differs from TTF prices by less than 35 euro per MWh. Accordingly, it is quite possible the ceiling will not trigger when the price reaches 180 euro per MWh at TTF. This also lowers risks of gas deficit," the expert said.
The gas ceiling may be efficient nevertheless but only when attempting to limit the price hike against a short-term gas shortage due to weather conditions, Ronald Smith from BCS Investment World said.
"This measure might be effective. It is really designed to limit price gains in a short-term, weather-related gas shortage, in my opinion, and then only if the price is breaking significantly away from LNG prices. Therefore, I don't think it will likely affect LNG supply to Europe," the expert said. "The most likely scenario is that it will limit a late-winter price spike to only $2,000/thousand cubic meters when it might have gone to $3,000/thousand cubic meters for a few days during a period of cold weather when storage is low (in late February, for example)," Smith added.
On December 19, EU member-states negotiated the dynamic gas price ceiling of 180 euro per MWh, which will become effective from February 15, 2023 but can be deactivated at any time in case of gas deficit.