Europe Gas Price Cap May Keep Lid On Volatile Asian Lng Market
BloombergDec 20, 2022
On Tuesday, Algeria, Africa's largest gas exporter, criticized the EU's recent decision to cap natural gas prices as an intervention disrupting the international energy market.
The North African country's energy minister, Mohamed Arkab, rejected the EU's "idea of limiting prices" for natural gas amid increased energy costs, noting that the move would have a negative impact on the flow of investment into the industry.
The EU's price cap not only destabilizes the energy market but is also set to exacerbate the EU energy crisis and expose Europeans to supply shortages, as liquified natural gas suppliers may favor Asia if prices are higher there. While the EU celebrates itself for finally agreeing on the price brake, the ill-considered mechanism may help prevent extreme price hikes, yet it might ultimately undermine the EU's prosperity and social cohesion.
The destabilizing factor is not the EU price cap but Algeria's geopolitical games and its proven willingness to weaponize its gas supplies. This is especially true in light of its growing ties with Russia and Iran. It's counterproductive and even dangerous for the EU to increase its dependence on Algeria to break away from Russia. The time has come for Washington and the EU to hold Moscow's ally accountable with sanctions.
By agreeing on a temporary price cap, the EU not only proved its ability to act but also lived up to its responsibility to shield its citizens from spiraling gas prices. Moreover, the deal provides a suspension mechanism if risks to the security of energy supply, financial stability, intra-EU flows of gas, or risks of increased gas demand come to light. With this breakthrough achievement, a united EU has shown shrewd strategic foresight.