EU to Help Consumers with Energy Crisis with the Help from Fossil Fuel Companies
The energy war between Russia and other parts of Europe has been taking a toll on European consumers. Industries and European households have to cope with the increasing cost of energy bills. Recently, the European Union has drawn up plans that would require fossil fuel firms to share their excess profits to help combat the rising cost of energy.
As Moscow slash the gas supply in response to sanctions imposed on Russia by Western countries due to the Russian invasion of Ukraine, many countries have experienced a rise in energy prices and inflation. Britain is among the countries facing a recession threat while France have informed its consumers that they will have to share in some of the pain of increasing prices.
European Commission proposal is seen as a way to tackle crisis
The European Commission proposal draft is expected to be unveiled later. The draft will allow the 27 European Union countries to introduce to the fossil fuel industry a ‘solidarity contribution’ to help consumers.
According to the European Commission draft, the fossil fuel industry, which consists of the oil, coal, refining, and gas companies, would be required to make a financial contribution that is based on taxable surplus profits made in the fiscal year of 2022. There can still be changes made to the draft and it still will need the approval by all the governments of the EU.
A request for a comment was put out to BP, TotalEnergies, and Shell but they have yet to say anything regarding the European Commission proposal draft.
Power firms who are faced with a liquidity crunch is expected to have a life-raft within the proposal. However, the EU countries are currently split regarding the details of the life-raft and if a cap should be imposed onto the prices that these power firms pay for gas. As European countries search for ways to handle the upcoming crisis, Russia commented that if a cap prince is introduced on its gas, the country would completely cut off all supplies.
Searching for other solutions to the current gas crisis
In Spain, the Spanish electric company, Iberdrola, said that any customers who are considered by the Red Cross to be vulnerable will be guaranteed gas and power supply for five months. After five months, all bills that are outstanding is required to be paid.
The French Finance Minister Bruno Le Marie said that when current caps on energy prices run out this winter, new energy price caps will be put into place to protect consumers. However, the new energy price caps will include increased prices in order to prevent irresponsible burdens on the state budget.
Over in Italy, Confindustria, the main lobby group for businesses, was in talks with the Italian government in order to see if any rationing of gas would take place this winter.
In January, Finland’s Gasgrid seek to import liquefied natural gas (LNG) via a floating terminal as the EU countries look to diversify its energy supply.
Inflation in Britain is at a 40-year high of more than 10%. In July, the British economy expanded by only 0.2% which was less than the expected 0.4% expansion. The construction sector was hit by increasing cost while the increased cost of energy has hurt the electricity demand.
An unpredictable future
A new arbitration process has been initiated by a Ukrainian energy firm called Naftogaz which have left it difficult for Russians to predict the consequences of the transit of gas to Europe.
Naftogaz had announced that Gazprom, a multinational energy corporation that is majority Russian state-owned, had not paid on time and in full the transportation of gas through Ukraine.
While the Nord Stream 1 gas pipeline remains closed, Russian national gas continues to flow from Russia to Europe along key routes. As the Iranian nuclear talks have stalled, prices of oil have increased. The future remains unpredictable as Russians face an embargo on oil shipments with supply tightening making it difficult to meet increased demands.
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