An EU Price Cap for Natural Gas: A Bad Idea Made Redundant by Market Forces

Abstract

The TTF thus represents only the marginal price for smaller quantities of varying amounts. This changed fundamentally when Gazprom cut most of its deliveries to Europe in early summer of 2022. This forced the customers of Gazprom, who had relied on their long-term contracts to go to the TTF to find the missing quanties. Moreover, demand for gas increased beyond the seasonal pattern because of new regulations on minimum storage levels which meant that many were scrambling for the little gas still available, i.e. the small quantities not committed under long-term contracts. The increased demand originated mainly in Germany, which had been the main customer of Gazprom until that point and which has the largest storage sites in the EU. This is why demand outstirpped the normally available supply by far.