In Euractiv, Lion Hirth speaks with Frédéric Simon on potential cap measures by the EU in response to the current Russian energy crisis.
In a policy document due to be implemented on Wednesday, May 18th, the European Commission urges member states to prepare for a “full disruption of Russian gas suppliers” including emergency measures like a temporary cap on gas prices.
However Centre for Sustainability professor, Lion Hirth, warns that capping gas prices will deplete storage and discourage firms from filling up.
“In gas markets, short-term spot prices are linked to long-term future prices through gas storages,” said Lion Hirth. “If governments announce a future price cap, firms have no incentive to fill gas storages, but quite the opposite: it would suddenly be financially attractive to postpone storage injections or even deplete storages today and sell gas as long as prices are high.”
Read more of Hirth’s comments on the European Energy Crisis in Euractiv here.