Home Commodities EU making progress, but remains divided over commodity price caps

EU making progress, but remains divided over commodity price caps

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European Commission President Ursula von der Leyen is continuing to work toward comprehensive policy that could put a limit on the price of commodities. Photo courtesy of European Union | <a href="/News_Photos/lp/1618edce17680cdbbb321a549232c158/" target="_blank">License Photo</a>
European Commission President Ursula von der Leyen is continuing to work toward comprehensive policy that could put a limit on the price of commodities. Photo courtesy of European Union | License Photo

Oct. 7 (UPI) — Bickering over considerations for a cap on the price of natural gas has led to growing internal divisions in the European Union, with Germany, the bloc’s leading economy, taking the brunt of the criticism.

Commodity prices are stifling the bloc’s economy, with Germany recently posting its sharpest uptick in inflation in more than 70 years. To address those concerns, European Commission President Ursula von der Leyen and Norwegian Prime Minister Jonas Store said they had a shared determination to bring stability to regional natural gas prices.

Their proposal would put a limit on the price of natural gas relative to the Dutch Title Transfer Facility, which is used as the regional benchmark for the price of natural gas.

Speaking Friday at a bloc-wide summit in Prague, von der Leyen doubled down on her proposal, saying it was also incumbent on reliable producers to work to reduce the burdens for the regional economy.

Russia is using its vast natural resources as a means to push back at the European Union for its vast condemnation of aggression in Ukraine. Von der Leyen said gas imports from Russia are down drastically from before the war, but the war continues to add a geopolitical risk premium to commodity prices.

Demand considerations are under review, as are efforts to ensure a price cap covers all economic sectors fairly. But the national interests of the many parties in the EU may be difficult to coordinate into a single policy.

Belgium, Greece, Italy and Poland are offering their own version of a price cap, while others, such as Austria and the Netherlands, are worried it would only incentivize demand further, erasing any of the gains.

Germany, meanwhile, is facing mounting criticism over a near $200 billion relief package designed to provide a buffer against soaring prices.

Italy, which was dealt a severe economic blow from the COVID-19 pandemic and may already be in recession, complained about Berlin’s spending, saying, “We can’t divide ourselves according to our fiscal room for maneuver,” the Washington Post reported.

The EU this week introduced a new sanctions package targeting Russia. The latest package would allow some Russian oil to flow to Europe, but only if purchased at or below a yet-to-be-determined price. That, too, would be difficult to coordinate, though the intensity of the recent discussions on caps in general marks a breakthrough in EU negotiations

EU leaders are expected to take up the issue at their regular meeting in Brussels, scheduled for Oct. 20-21. Czech Prime Minister Petr Fiala was quoted in the EU Observer as saying that meeting marks an “important deadline” in price cap considerations.

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