EU Gas Price Cap Could Cause Permanent Damage to Markets, Europe’s Energy Exchanges Warn

Pipes at the landfall facilities of the Nord Stream 1 gas pipeline are pictured in Lubmin, Germany, on Mar. 8, 2022. Hannibal Hanschke/Reuters

With the European Union (EU) pushing ahead with its proposal to cap gas prices, leading energy exchanges are warning that the decision could pose a serious economic threat to the region.

In a Nov. 19 letter to members of the European Commission, the Association of European Energy Exchanges (“Europex”) pointed out that gas derivatives were a crucial tool for producers and consumers to hedge against gas spot price volatility. If price caps on gas derivatives, like the Title Transfer Facility (TTF) front-month futures contracts, are put into place, it could trigger “major risks to financial stability and security of supply.”