EU prepares emergency plan to halt energy prices
Gas prices in Europe are heading towards unaffordability.
The European Union is preparing for emergency action to reform the electricity market and hold the energy prices in its grip, especially since they have soared since the war in Ukraine began, according to senior officials on Monday.
EU energy ministers will be holding urgent talks in Brussels, Belgium, on September 9.
The high gas prices have been followed by disruptions in the nuclear and hydroelectric sectors against the backdrop of a heatwave due to climate change, threatening businesses, and households with bills beyond affordability.
"The skyrocketing electricity prices are now exposing the limitations of our current electricity market design," said EU Commission president Ursula von der Leyen.
"It was developed for different circumstances. That's why we are now working on an emergency intervention and a structural reform of the electricity market."
German Chancellor Olaf Scholz called for also called for action.
Read more: European gas prices surge to six-month peak
Czech Prime Minister Petr Fiala held talks with Scholz, after which Scholz noted that "we are in complete agreement that rapid action has to be taken" to reform the market.
"My impression is, I think our common impression is, that this will now succeed more quickly across Europe than under other framework conditions," he said.
"We must fix the energy market. Solution on the EU level is by far the best we have," he said on Twitter.
The European Commission will need to publish a detailed plan for market reform. However, some EU member states have been pushing for a temporary cap on the prices.
Two weeks ago, European gas prices hit a six-month high, compounding recession fears as the area faces rationing due to Russian supply disruptions caused by the war in Ukraine.
Meanwhile, oil prices continued losses a day after falling more than 5% on expectations that demand may fall owing to recessions or poor growth in big economies, such as China.
In Europe, the Dutch TTF natural gas reference price rose more than 10% at one time to more than 250 euros per megawatt hour, the highest level since the beginning of March, not long after the war in Ukraine.
"Energy prices are soaring in Europe," said market analyst Fawad Razaqzada at City Index and FOREX.com.
"Reduced Russian energy shipments of around only 20 percent of capacity through the Nord Stream 1 pipeline have increased the risk of rationing in the coming months," he added.
Rising gas prices would almost surely plunge European economies into recession, cutting demand for other commodities, such as oil.