The European Commission intends to propose a mechanism to reduce the volatility of gas prices

The European Commission intends to propose a mechanism to reduce price fluctuations in the EU’s largest gas market and prevent a sharp rise in derivatives prices to contain the energy crisis in the region.

An interim mechanism developed by the European Commission will impose a dynamic price cap on transactions in the “Transfer of Ownership Mechanism”, a hypothetical natural gas trading point in the Netherlands, whose main index is the benchmark for all gas traded on the continent. Bloomberg News.

European Commission President Ursula von der Leyen said earlier this month that the facility no longer reflects the bloc’s energy reality after Russia cut off supplies to Europe and the share of gas dropped from 40% to about 7%.

“This will help avoid extreme volatility and price increases, as well as speculation, which could lead to difficulties in the supply of natural gas to some member states,” the draft document, seen by Bloomberg, says.

The European Commission has a policy of not commenting on documents that have not been published, and the draft is subject to change before its adoption, scheduled for Tuesday.

In the next phase, EU leaders will discuss the package at their October 20-21 summit in Brussels.

According to the draft, the package will also include a temporary intraday price cap mechanism to avoid extreme volatility in the energy derivatives markets.

The goal is to “provide a more robust pricing mechanism”, protect the region’s energy companies from price spikes and help them secure supplies over the medium term.

The commission is under increasing pressure from national governments to cap gas prices.

Italy, Greece, Poland and Belgium last week proposed shutting down the region’s largest shopping malls, which would include a corridor allowing prices to fluctuate by, say, 5%.

They also suggested that the price range be reviewed regularly to reflect the level of other major energy standards such as crude oil, coal and gas prices in North America and Asia.

Source: agencies

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