EU Powers Through Gas, Energy Crisis Due To Sanctions On Russia

Natural gas prices fell to their lowest level in nearly two months on Monday as the European Union began assembling a plan for the ongoing energy crisis. EU's members also are reportedly also considering proposals for curbing electricity demand.

On Monday, the EU drafted legislation that would see a price cap on natural gas. The proposal also called for energy companies to provide a "solidarity contribution" to ease the burden on citizens.

Benchmark gas futures have fallen to 9.3%, their lowest level in a month and prices are still nearly eight times higher than usual for this time of year. Goldman Sachs expects prices to be halved by the first quarter of 2023.

Europe appears to be caught in a natural-gas quagmire after sanctions against Russia for its invasion of Ukraine. Europe has since sought alternatives to Russian gas.

According to a recent report by the International Monetary Fund, natural gas prices rose five-fold between early 2021 and mid-2022. The report found the cost of living for European households increased on average by nearly 7%.

In a push to alleviate the crisis, EU members are looking to limit power consumption while generating liquidity for the energy market.

Ahead of winter, faced with reduced supplies from Russia, the union is stockpiling gas and seeking ways to diversify its fuel sources.

Germany recently announced that two of its three power plants would remain available until about April 2023.

Finland's state-owned natural gas transmission system operator said it is seeking to begin liquefied natural gas imports through a planned floating terminal next January.

Meanwhile, Norway remains skeptical of price caps given the dearth of supply.
"A maximum price would not solve the fundamental problem, which is that there is too little gas in Europe," Norwegian Prime Minister Jonas Gahr Stoere said.

Furthermore , EU officials remain opposed to a price cap solely on Russian gas. Before the invasion, Russian gas made up 40% of the region's supply. That share has since shrunk to 9%.