By Geoffrey Smith
Investing.com -- Divisions over how best to tackle Europe's energy crisis were on full display early Friday as energy ministers from the European Union met to discuss radical proposals on capping prices, raising taxes, and reducing demand.
Expectations for decisive action at the meeting are low, due to differing opinions about the proposals announced by the European Commission on Wednesday. While France and Germany have broadly backed them, many other states' officials have voiced reservations about them.
Talking to reporters ahead of the meeting, EU Energy Commissioner Kadri Simson indicated that she doesn't expect firm decisions on the measures at least until next week, but stressed that the objective remains clear.
"Russia has used its gas supplies as a weapon to foster an energy crisis next winter, but also to weaken our economies and divide politically the European Union," Simson said. "We have to ensure that their efforts will fail."
Arriving a few minutes later, German Economy Minister Robert Habeck said Germany supports the Commission's measures but acknowledged that they might create problems elsewhere in the bloc. Russian President Vladimir Putin has threatened to stop all energy exports to any country that tries to impose the kind of price cap suggested by Brussels. That would leave countries such as Bulgaria and Hungary, which are overwhelmingly dependent on Russia due to geographical and historical reasons, with next to no reliable supplies for the coming winter.
Opposition to the Commission's plans has also come from Spanish and Portuguese officials, who fear that a price cap solely on Russian gas would leave their countries at a competitive disadvantage, given that they source their gas largely from North Africa and from liquefied natural gas imports.
Various reports have also suggested that some member states are pushing for the price cap to be applied to all piped gas imports. That would have a much broader impact on the wholesale gas price, which in turn has been the cardinal factor in driving electricity prices to unsustainably high levels this year. However, it would also risk antagonizing North African suppliers such as Algeria and Libya, which southern Europe, in particular, has been pleading with to raise their output.
European natural gas futures hit their lowest levels in nearly a month on Wednesday, as the Commission announced its proposals. They bounced a little on Thursday but have resumed their downward trend on Friday, falling 5.3% to 208.80 a megawatt-hour by 06:00 ET (10:00 GMT). Benchmark German power prices, meanwhile, have slid some 20% in the last week. Both remain well above their historical averages, however.