European Governments Weigh Billions In Aid To Weather Soaring Gas Prices

Surging gas and electricity costs are forcing European governments to discuss billions of euros in aid for households and stricken suppliers, as concern mounts over a deepening winter energy crisis.

EU energy ministers will meet this week to discuss national responses to a surge in wholesale gas prices, amid concern that they will jeopardise Europe’s post-pandemic economic recovery and undermine Brussels’ plans for ambitious but costly green reforms.

Italy is expected this week to unveil a multibillion-euro support package for households. A source at the Italian finance ministry with direct knowledge said “a plausible amount to tackle the issue [of soaring energy costs] could reach up to €4.5bn”.

Rome has already spent €1bn on intervening directly in the energy market to cut consumer prices. Italy covers more than two-thirds of its energy needs with imports.

Italy’s plans follow Spain’s decision last week to raid what it says are energy companies’ excess profits and provide tax breaks to consumers. Companies are expected to mount a legal challenge to the move, which has driven down share prices.

France has already announced a €100 subsidy for almost 6m low-income households. The UK’s government is also considering providing energy companies with emergency state-backed loans to take on unprofitable customers from failing smaller suppliers, and has admitted that several companies could go bust in days.

Equinor, the Norwegian state-controlled oil major, said on Monday that it would increase its gas supply to Europe by boosting production from two North Sea fields from Friday. Equinor said it was looking at further ways to boost exports. 

“We believe that this is very timely as Europe is facing an unusually tight market for natural gas,” said Helge Haugane, head of gas and power at Equinor. Norway is the biggest natural gas supplier of the EU behind Russia.

Spain’s government also called on Monday for the EU to centralise natural gas purchases to counteract vendors’ market power and build up strategic reserves.

“Member states should not need to improvise ad hoc measures every time markets malfunction,” Madrid said in proposals sent to the European Commission. “Gas producers are behaving strategically to maximise their profits. We should act together to avoid being at their mercy.”

The surge in wholesale gas prices has been driven by falling storage capacity during a prolonged winter in Europe last year, as well as lower natural gas exports from Russia to north-west Europe this year ahead of the start-up of the politically controversial Nord Stream 2 pipeline.

Gazprom, Russia’s state-backed monopoly gas exporter, has fulfilled all of its long-term contracts to customers but not made additional top-up sales available through Ukraine this year, while allowing its own storage facilities in Europe to fall to low levels.

Alexei Miller, chief executive of Gazprom, said on Friday that while Europe was facing a potentially prolonged period of record prices this winter, “the Asian market is more attractive for producers and investors”.

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Source : https://www.ft.com/content/0fba039b-9e1a-413f-aa3a-7478d02ef3a5

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