Save for later Print Download Share LinkedIn Twitter Participants in the European gas market have dismissed the European Commission's price cap proposal as a politically driven and largely symbolic measure that is unlikely to have much impact on gas prices in practice.The commission is simply "trying to show that it is doing something" one trader said of the proposal to cap the price of the front-month Dutch TTF gas futures contract — a widely used reference price — at €275/MWh ($83/MMBtu).Politicians across Europe have been under pressure to take action as a sharp fall in pipeline gas imports from Russia drove gas and electricity prices to sky-high levels this year, inflicting financial pain on vulnerable businesses and consumers.But market players said that by setting the proposed cap at such a high level — and attaching other conditions — it was unlikely to be activated.Furthermore, they added, the commission understands that a low price cap would discourage imports of gas into Europe and exacerbate the region's supply problems."They know that if they cap [prices] at €150 or whatever, there is a supply risk in Europe," a gas trader at a European major told Energy Intelligence. "We really need LNG to flow here, otherwise we will destroy European industrial activity even more." Key ConditionsThe proposed cap would only be triggered if the price of the TTF front-month contract remained above €275/MWh for two weeks and also exceeded an international LNG reference price by at least €58 for 10 consecutive days.Several market participants said it was highly unlikely that both of those conditions would be satisfied."In practice this is quite unimaginable," said a gas trader at a major Central European energy company.Indeed, the two conditions were not fulfilled at the height of the surge in European gas prices in August of this year, when the front-month TTF contract peaked at around €350/MWh but only exceeded €275/MWh for half a dozen days.Gas prices have fallen considerably from their summer highs as Europe did a good job of filling up its gas storage facilities ahead of the winter heating season, although prices remain well above historical levels.The front-month TTF contract traded in a range of about €122/MWh to €134/MWh on Wednesday after settling at €119.64/MWh on Tuesday. Unintended ConsequencesThe Association of European Energy Exchanges and the European Federation of Energy Traders warned that the price cap proposal could have harmful unintended and irreversible consequences for European industry and consumers.And the Central European trader noted that the European Commission's price cap proposal is quite far removed from earlier discussions about measures that would specifically target imports of Russian gas. EU energy ministers were set to consider the price cap proposal at a meeting on Thursday, but the issue has divided the 27-nation block so far and an agreement may remain elusive.In addition to the price cap, the energy ministers were also set to discuss proposals to facilitate joint gas purchases and cross-border exchanges of gas by EU member states and to accelerate permitting for renewable energy projects.An EU diplomat said there were concerns among some member states about the extent of their obligations to help each other out with gas supplies — an energy security issue that the block was supposed to have addressed some years ago. Those concerns include whether a member state with an LNG terminal has an obligation to supply LNG to a landlocked member state without a terminal and whether it is obliged to transfer gas from storage to a member state that needs gas.