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European Union moves to contain fuel prices by imposing a cap

By:
on Sep 30, 2022
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  • EU nations endorse plans to contain rising fuel prices
  • European Union to tax extra profits generated by fossil fuel firms
  • The EU expects to collect €140 billion from energy firms’ windfall profits

On Friday, member states of the European Union voted to implement emergency taxes on oil companies’ windfall revenues. They started discussions about their next course of action to address Europe’s energy crisis, including a cap on gas prices across the entire Union.

EU nations endorse plans to contain rising fuel prices

The 27 European Union members’ ministers gathered in Brussels to endorse steps recommended at the start of the month to tame the rise in fuel prices driving record-high inflation, with the possibility of a recession.

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The package comprises a tax on the extra profits generated this year or the following year by fossil fuel corporations, a second tax on the windfall profits low-cost energy providers’ gain from rising energy prices, and an obligatory 5% reduction in power consumption during peak pricing seasons.

With the agreement reached, negotiations on the Eurozone’s next step to curb the price spike got underway on Friday morning. Most nations want the Union to impose a broad fuel price ceiling, but others, notably Germany, are still resistant.

Croatia’s economy minister Davor Filipovic said:

All these temporary measures are very well, but in order to find the solution to help our citizens in this energy crisis, we need to cap the gas price.

Countries proposing a cap on wholesale gas prices to tame inflation include Italy, France, and Poland. In a note, Greece, Italy, Poland, and Belgium said that the cap should be set at a flexible and high-level o to enable the EU to attract necessary resources. In addition, the nations disputed the European Commission’s claim that a fuel price cap might need considerable financial resources to facilitate emergency fuel purchases if market prices exceed the Union’s cap.

EU to collect €140 billion from energy firms

Belgium’s energy minister Tinne Van Der stated they would need €2 billion since most European imports are long-term contracts without easy alternative buyers. This is just a fraction of the €140 billion the Union anticipates to raise from the revenue taxes on oil firms.

Interestingly, Austria, Netherlands and German, and others are against the caps stating that they could leave nations struggling to purchase gas if they are unable to compete in the price-competitive markets.