The E.U. weighs a Russian gas price cap and other measures to rein in ‘astronomic’ energy prices.
BRUSSELS — With Russia’s invasion of Ukraine triggering a devastating energy crisis in Europe, the European Commission said on Wednesday that it would ask countries to approve a broad cap on the price of Russian gas. It is also proposing measures like mandatory cuts in electricity use, a tax on oil and gas companies, and a tax on the price of electricity generated by renewables.
The moves, which were outlined by the Commission’s president, Ursula von der Leyen, set the stage for a period of intensive and urgent debate in the European Union to quickly tackle the unprecedented energy crisis engulfing the region as Russia cuts its supply of natural gas to many E.U. member states, sending the gas and its linked electricity markets into a sharp spiral.
Russia has turned the gas tap on and off to punish European countries, primarily Germany, for supporting Ukraine, blaming the widespread disruptions on technical problems and maintenance.
E.U. energy ministers will meet on Friday in Brussels to debate the bloc’s proposals. European governments from Germany to Greece are burning through billions of euros a month to subsidize consumers’ and businesses’ electricity bills, which are in some cases five times as high as last year.
Managing electricity prices is not only an economic and social goal, but also a political imperative in Europe. With memories of the “yellow vest” protests in France over energy prices still raw, and new movements bubbling up to denounce rises in the cost of living and, in some cases, continued support for Ukraine against Russia’s invasion, European politicians have little choice but to take unorthodox and expensive measures to placate outraged consumers.
Understand the Decline in U.S. Gas Prices
Understand the Decline in U.S. Gas Prices
Gas prices are falling. In August, U.S. gas prices retreated to their lowest level since March, providing relief for Americans overwhelmed by high prices at the pump. Here is what to know:
Understand the Decline in U.S. Gas Prices
Demand is pushing prices down. As gas prices rose, people adjusted their driving habits to accommodate prices, which reached an all-time high in June. Fewer drivers on the road has made gasoline more affordable, and some states have also suspended taxes on gasoline to bring prices down.
Understand the Decline in U.S. Gas Prices
Oil prices have fallen. Just two months ago, oil prices, which are tied to gas prices, surpassed $120 a barrel, helping to push the national average price of gasoline to about $5 a gallon. But prices have steadily decreased with increased oil production, helping to bring gas prices down and easing broader recession fears.
Understand the Decline in U.S. Gas Prices
Gas prices vary. Despite the overall decline, the cost of gas can vary considerably at the state level. In California, regulations to limit pollution make driving more expensive, so gas prices will be higher than in a state like Georgia, which has lower gas taxes.
Understand the Decline in U.S. Gas Prices
A political boost for Joe Biden. The cheaper prices are a political win for President Biden, especially as falling fuel costs have brought down overall inflation. But experts are unsure that the low prices will last, as oil prices are volatile and determined by myriad forces, many of which are hard to predict.
“We are facing an extraordinary situation because Russia is an unreliable supplier and is manipulating our energy markets,” Ms. von der Leyen said in a statement on Wednesday.
She added that the bloc’s natural gas storage facilities were already 82 percent full and that Russian gas imports had dwindled from 40 percent of the bloc’s total to a mere 9 percent. Thirteen of the European Union’s 27 members are facing partial or total Russian gas shutdowns, with the biggest effect being felt in Germany, the bloc’s biggest economy and the most reliant by far on Russian gas.
President Vladimir V. Putin of Russia was defiant in the face of the price cap threat, calling it another example of “stupidity.”
“All administrative restrictions in global trade only lead to imbalances and higher prices,” he said on Wednesday at an economic news conference in the Russian far-eastern city of Vladivostok.
In her speech on Wednesday, Ms. von der Leyen said governments needed to intervene urgently in the gas and electricity markets — a concept that most E.U. countries agree on, although there are disagreements over how to best do that.
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“We are confronted with astronomic electricity prices for households and companies and with enormous market volatility,” she said.
In July, the Commission secured support for voluntary cuts in energy use of 15 percent by next summer; on Wednesday, Ms. von der Leyen said she would propose mandatory cuts in electricity use during peak hours.
Because the European electricity market links the price of electricity to the price of the most expensive fuel used to generate it — in the current moment, gas — Ms. von der Leyen also said she would ask E.U. countries to effectively tax companies that generate electricity from non-gas sources.
Following a model already in place in Greece, Ms. von der Leyen said governments should use these funds to “support vulnerable people and companies to adapt.”
She also suggested that oil and gas companies, which are making huge profits, should pay a “solidarity contribution” and that governments should be able to subsidize national utility companies that are facing large input costs to continue producing electricity.
Ivan Nechepurenko contributed reporting.
