European gas and electricity prices have been wildly surging over the last few months, made even worse by the Ukraine war. This is largely because Russia supplies Europe with around 40 percent of its gas, and has slashed deliveries to the bloc over recent months, while the Ukraine war has shaken up the supply chain. But because of how the EU’s energy pricing system works, whether electricity is generated by gas or renewable sources, the pricing remains the same.
This is particularly frustrating for Spain, which only generated 10-15 percent of its electricity from gas in 2021, while half was generated from renewables.
Member states of the 27-nation bloc have been at loggerheads as to how to address this, sending tension within the union flying.
Spanish PM Pedro Sánchez has now blown his top after leading charge since September for the EU to intervene in energy markets and change its pricing system.
Spain has been at the sharp end of the surging energy costs and is furious that electricity contracts link their bills directly to spot market rates.
These rates skyrocketed 400 percent between April and October 2021, and Russia’s invasion of Ukraine has pushed these even higher.
Mr Sánchez is now expected to press leaders to recognise that “contagion effect” and encourage the decoupling of electricity and gas prices.
But this intervention has not been warmly welcomed.
Germany and the Netherlands have pushed back Spain’s calls, despite having to make concessions.
Last year, the pair claimed that high energy prices were “transient” and would ease by Spring.
But they still uphold that there is no magic cure to the soaring prices other is no silver bullet other than reducing demand or supply.
READ MORE: India comes to Russia’s rescue and orders 15 MILLION barrels of oil
But now, the tone appears to have changed after publishing a new energy strategy detailing how the bloc could permanently scupper ties with Putin.
Germany pushed back on this too, arguing that slashing Russian energy imports would be too damaging for the economy.
German Vice-Chancellor Robert Habeck said on public radio DLF on March 19 that completely slashing Russian energy imports could mean a “three percent to five percent loss of GDP”, which would lead to “some people no longer earning any money at all”.
He added: “And these some people are very, very many”.
“If certain sectors, such as the chemical industry or steelworks, can no longer produce, entire supply chains will break down.”