Rising Energy Prices: European Union Makes Move

European Union members will meeton Friday 9 Sep. 2022 in Brussels to discuss cold-weather measures.

The European Commission has requested countries to consider five swift actions, including reallocating energy producers' bonus cash to organizations and individuals (unlike England), restricting the cost of Russian pipeline gas, and lowering peak-hour power usage. The transaction shows Europe's prudence as conflict's impact weighs on the economy. As a result, the ECB raised rates twice this year to restrict growth without a recession.

Ursula von der Leyen highlighted the actions days after energy goliath Gazprom froze the gas supply through a vital pipeline. The Kremlin maintained the decision was about Western consent.

"We're taking measures because Russian energy dominates our markets," Von der Leyensaid. Unity and determination will win.

Despite talk of resolve, the EU is divided on specifics, with some nations distrusting bonus charges and others apprehensive about a gas price limit. Others seek to restructure the alliance's power market and decouple gas and power.

Senior EU negotiator: "Overlooked details are the main issue."

As Europe seeks long-term unity, Russian President Vladimir Putin will play states with varying degrees of Russian energy reliance against one other to debilitate the West's reaction, said Bruegel energy analyst Simone.

"Russia wants to rule."

Since Russia's full-scale onslaught, the EU has moved to weaken its energy influence.

Von Leyen said Russian pipeline gas accounts for 9% of EU gas imports, down from 40% before the crisis. The EU attained 80% gas storage last week, before November's weather changes. EU leaders believe Putin's authority is waning as Europe uses less Russian nonrenewable energy.

EU nations spend billions on power while energy markets remain in crisis. Germany presented a $65billion aid package on Sunday. Chancellor Olaf Scholz vowed to eliminate energy corporations' "over-the-top benefits." Gas, oil, and coal prices will drop due to manufacturing bonuses.

According to a summit report,

The EU's commission may want similar moves at the EU level. Von der Leyen on Wednesday recommended a ban on the profits of corporations that generate power at a cheap cost but sell it at exorbitant rates.

Electricity discounts are related to volatile gas prices, which have risen due to Russia's invasion of Ukraine. Solar and waste-to-gas energy cost more under the framework.

The commission wants to standardize European energy prices. It would charge a bonus to power firms with record profits from high oil prices and use the money to cut customer energy tariffs.

The design is dangerous. Europe's energy consumption is high. Market bending may exacerbate deficits without lowering interest rates or bringing more energy into Europe. Second, the incentive fee might hinder energy infrastructure investment. Third, lower energy costs may stimulate higher consumption, worsening inventory issues.

The agreement includes a need to cut energy use during busy hours. Such reductions require nations to pay sponsorships to make up for production losses. In addition, the individual country must "select the optimal strategy to minimize overall use."

Liz Truss argues a bonus charge will frighten away investors. She revealed Thursday a proposal to reimburse $2,875 per family annually for two years. She didn't say how $150 billion would be paid.

EU wants the coalition to buy Russian gas oil. This would allow countries to import Russian gas if the price didn't surpass a threshold. Russia keeps the gas flowing by setting the cost cap above production costs but below actual costs.

Von der Leyen: "We should cut Putin's income."

Few nations and investigators doubt this, considering Russia controls gas supplies and uses them as a monetary weapon against Europe. Russia might exploit the measure to justify future interruptions or ban European gas

Putin promised to meet any further measures. He criticized the G7's oil price cap and warned of more shorts in a speech Wednesday.