Europe moves closer on limiting natural gas prices as Brussels looks to protect consumers

The European Union is nearing an agreement over a cap on natural gas prices, with Brussels already starting preparations for the next winter as the global energy crisis shows no signs of going away.

EU energy ministers gathered in Brussels, Belgium, on Tuesday to discuss the details over a cap on natural gas prices. The topic has divided the 27 EU nations with some pushing for a lower cap below 200 euros ($211) per megawatt hour, whereas others are skeptical about the measure and want stronger reassurances it will not cause unnecessary market volatility.

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“I believe we have started to bring our positions closer,” Agnès Pannier-Runacher, France’s minister for energy transition, said before the meeting began.

Officials have suggested that the cap could land between 180 euros and 220 euros per megawatt hour. This is after the European Commission, the executive arm of the EU, proposed a level of 275 euros per megawatt hour — this was heavily criticized by many nations for being too weak and highly unlikely to ever be triggered.

However, while these discussion drag on, the EU is looking at how best to prepare for next winter. This as the International Energy Agency warns there could be a gas shortage of 30 billion cubic meters in 2023.

“More is needed,” European Commission President Ursula von der Leyen said Monday, adding that securing more LNG supplies is a priority.

“This year, we had up to 130 billion cubic metres of LNG. For this, we of course have to further intensify our outreach to our international partners,” she said.

The IEA warned of fiercer competition for the commodity in 2023. They expect fewer LNG supplies in the market, but more demand — most notably from China, which has started reducing Covid-19 restrictions and is therefore more likely to need more gas in 2023 as its economy returns to some sort of normality.

This year, the EU reached agreements with the U.S., Qatar and others in an attempt to cut its reliance from Russian hydrocarbons. However, experts have argued that the bloc will have to start from scratch as it prepares for next winter.

Georg Zachmann, senior fellow at Bruegel, told CNBC’s “Squawk Box Europe” that next winter season will depend on whether “global LNG markets are as gracious as they have been this year.”

If that doesn’t happen and other markets are keen to get LNG “then we will be in for a tough ride,” he added.

One of the main concerns, however, is whether the EU will repeat past mistakes and be dependent on just one supplier. Before Russia’s unprovoked invasion of Ukraine, Moscow provided about 40% of the EU’s pipeline gas imports.

“We are not entering the same sort of dependencies but of course this needs to be better watched also with importing hydrogen and others, so we are not increasing our dependencies on another front now,” Zachmann added.