Sánchez will decide if he removes the cap on gas in the middle of the campaign for the municipalities
The Government will have to decide if it maintains the cap on gas in May, at the gates of the municipal and regional elections in 14 territories, and barely six months after summoning the Spaniards to the polls again to elect their representatives at the national level. In this political context, from the PSOE environment they warn that ending the hydrocarbon price limit at that time would be equivalent to buying tickets for a electoral bumpgiven that technical and business sources assure La Información that it will be very difficult for prices not to rise if the ‘Iberian exception’ comes to an end and the European limit is applied, which is more than double what Spain will have in five months and will mean a more than certain increase in energy prices.
An upward movement in gas would translate into new rise in inflation and it would curb the effect of many of the government’s measures to relax prices, since it would be rapidly transferred to the rest of the products, as it happened in the last year. From the business side it is understood that the limit set by Brussels of 180 euros per megawatt hour for imported gas is high, if we take into account that the futures market prices forecast for this year do not reach that amount. But from the sector they warn that the most probable thing is that the price moves, on average, above the 70 euro ceiling that Spain and Portugal will have in May, so that, if the exceptional measure is not extended with the guarantee of Brussels, it is certain that gas and electricity will be more expensive in the Iberian Peninsula from that moment, in the middle of an election year.
In addition, Spain will occupy the presidency of the Council of the European Union in the second half of the year, so Pedro Sánchez will seek to maintain leadership in this matter within the group of 27. With the standard-bearer victory in Brussels last April, Spain and Portugal managed to limit the price of gas for one year, with an initial ceiling of 40 euros/MWh that would increase by five euros per month from December 2022 until reaching the 70 euros when the term runs out. RDL 10/2022 established that the measure would be in force for 12 months, in response to the exceptional situation caused by the war in Ukraine, so May 31 is its deadline, just three days after the first appointment. election of the year
This implies that the Government will have to transmit to the European Union his willingness to extend the limit to the price of hydrocarbons in the middle of the electoral campaign of the municipal elections, which are not a minor matter for the parties that are members of the Council of Ministers. Especially for the socialist wing that is at stake to revalidate 22 mayoralties of provincial capitals and more than 80 municipalities with more than 50,000 inhabitants, while its purple partners fall in the polls and the PP takes advantage of the announced death of Ciudadanos. In addition, the socialist governments of Aragon and Extremadura are in danger, according to the CIS survey published in December, and is at risk of being overtaken by Más Madrid on the bench of the opposition to Ayuso.
For the moment, the Government has not confirmed whether or when it will transmit this request to Brussels, despite having expressed its satisfaction with the mechanism on numerous occasions. However, the Minister for Social Rights and the 2030 Agenda, Ione Belarra, surprised this Wednesday with a publication on Twitter in which he implied that the decision had been made. “It is great news that the PSOE has accepted our proposal to keep the gas cap at 40 euros and for longer, initiating a new negotiation with Brussels,” he wrote.
model under surveillance
The decision not to extend the period of exception, or worse, receiving a negative response from Brussels would put Sánchez in a bind. The forecast of a rise in the prices of gas and consequently, of electricity, would not be a good slogan for the socialist candidates at the local and regional level; If the cap is raised to 180 euros/MWh and the Spaniards notice in their pocket the general increase in prices that experts are already warning about, it would make it really difficult for the Socialist leader to revalidate the Government. Even more so, when the economic crisis constitutes one of the main concerns for citizens, as the CIS survey has confirmed for several consecutive months.
The problem for the head of the Government is that not everything is in his hands to be able to extend the term of application of this limit. The work of Teresa Ribera’s portfolio will be key in evaluating the effects of the mechanism, which in 2022 was calculated to save 4,000 million euros. But the opinion of experts appointed to oversee its operation it will also weigh when making the final decision and submitting the request to the highest European authorities. In any case, the fear on both sides of the Administration is that a new increase in gas prices will trigger the price of electricity to values that exceed 200 euros/MWH, far removed from the minimums registered during the holidays. Christmas.
In addition, the European institutions also conceive it as an exceptional performance, which attends to a specific context that is difficult to anticipate, as it is to know what Putin’s movements will be by then. However, the measure was also attractive to other euro area countries, which ended up demanding, with the support of the third vice president and minister for Ecological Transition and the Demographic Challenge, a different cap on gas, which ended up being set at 180 euros/MWh with the favorable vote of Germany and the abstention of the Netherlands. After eight long hours of meeting, the 27 agreed that this limit will be activated if the gas price exceeds that amount for three consecutive days and there is a difference of more than 35 euros with the global LNG markets.
The EU has launched this week the process to lay the foundations for a energy market reformwith the main objective of decoupling the price of electricity from the gas market, so as to completely eliminate the Russian supply dominance. While this reform, which will directly link Spain, is being deliberated and submitted to public information, the context of the Iberian exception may also change significantly, something that would further complicate the decision that the Spanish Executive must make regarding its possible extension. .