Europe energy crisis: UK gas prices hit highest records in years

The United Kingdom gas prices have soared to its highest note in years with increasing prices reflecting the current current market conditions across Europe, including the continued geopolitical uncertainty and rising tensions over the 759-mile Nord Stream 2 pipeline.

Reports posited had it that allegedly accused of Russia mounting pressure on Europe by reducing supplies into the continent, in order to get Nord Stream 2 approved, which could reduce Ukraine’s influence in the region.

UK gas prices surged to an all-time high of 350p per therm on Thursday, up 520 percent year-to-date amid soaring demand and continued supply concerns across the continent this winter.

While prices dropped to 320p per therm on the UK Natural Gas Futures on Friday morning, the benchmark remained ahead of Asia’s liquefied natural gas.

The head of oil and gas research at Investec, Nathan Piper anticipated that gas prices would remain high as economies recover from the pandemic.

According to him, “We believe there is a high likelihood of both prolonged and even higher prices through winter with after-effects that could stretch beyond the next two years.”

The soaring prices reflect current market conditions across Europe, and follow continued geopolitical uncertainty and rising tensions over the 759-mile Nord Stream 2 pipeline which would double Russian gas exports into Germany.

The Kremlin-backed controversial gas project – which would supply 55 billion cubic metres of gas per year – has been completed but awaits approval from German regulators, who are yet to certify the pipeline due to concerns over its governance.

The regulator announced that no decision on certifying the pipeline was expected in the first half of next year.

“There will be no decisions in the first half of 2022,” said Bundesnetzagentur (BNetzA) President Jochen Homann.

President Vladimir Putin has dismissed any allegations of pressure, saying they are “politically motivated blather.”

Gazprom’s export growth decreased to less than five percent in recent months – although the energy giant insists it has honored all agreed contracts.

However, Germany has warned Russia the pipeline will be rejected if Russia invades Ukraine, with 120,000 troops currently positioned near its eastern border.

Investec believed these tensions would inevitably influence prices over winter – while the lack of Nord Stream 2 would continue to limit overall energy supplies.

He said: “We expect political tensions around the Nord Stream 2 start-up will increase as US and EU consider economic sanctions on Russia with repercussions on EU gas supply, increasing UK and EU gas price volatility.”

The analyst also suggested the continued rising costs would make it more difficult for the UK and EU to refill supplies with both countries suffering from decisions to reduce storage capacity as part of the transition to renewable sources.

According to Citi AM, the UK reportedly can only store gas seven days in advance since scrapping its largest rough storage site in Yokrshire.

He said: “Continued higher gas prices will make refilling UK/EU gas storage facilities next summer challenging, and EU gas storage is already at multi-year lows. High gas prices this summer meant storage was low going into winter, while LNG continued to be exported to Asia. Next summer, the situation could be more acute.”

Soaring wholesale gas prices have already contributed to 25 UK energy firms ceasing trading over the past three months, with over four million customers directly affected.

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