Energy market update: Ukraine and Russia conflict impacts the UK energy market

For many years, the UK have imported gas supplies from Central Europe and Russia, this is a cost-effective way for the country to access Natural Gas without using intrusive methods on-land such as fracking or mining.

Since 2010, our dependency on gas reserves and import levels have reduced thanks to innovate ways of creating renewable sources of power.

Currently, the level of gas imported directly from Russia is approximately 5% of our overall use, however, a further 42% of gas is imported from Europe, with many of their supply chains coming from Russia. This makes the UK more dependent on the Russian gas market to supply our demands. Therefore, the ongoing conflict between Russia and Ukraine indirectly affects our supply.

Nord Stream 2

The Nord Stream 2 Pipeline is the new gas line that is set to flow gas from Russia direct to Germany under the Baltic Sea. The pipeline is completed however its operation has been put on hold due to the conflict between Russia and Ukraine.

Nord stream 2 is parallel to the existing pipeline Nord stream. The 2, provide a quarter of European country’s annual gas usage which highlights the severity of the depletion in supply.

In the EU and UKs damage control efforts, they have imposed financial sanctions on Russia, which has subsequently affected the countries abilities to forward-buy gas reserves.

As you may have seen, prices have been increasing every day since Autumn 2021. Although the market saw some stability in late January – early February. The developments in Ukraine have had a major impact on gas supplies and the ability to purchase, since sanctions have been made such as Russia being unable to trade in dollars, this has seen prices upwards of 30%.

As a result, UK energy suppliers are being extremely cautious in their purchasing with the majority of them temporarily closing their price books.

What does this mean if you have an energy supply due for renewal?

It means that pricing is much slower than usual and less competitive, however, falling into variable rates will see you immediately and directly impacted by market prices. You could be subject to bills in excessive of twice your contracted rate.

Advice to commercial users from our team of energy experts: 
  1. Prepare- Use the knowledge that pricing is taking longer than usual, if you would usually shop around within the last month of your contract, consider doing this a month or so earlier than usual
  2. Reduce – Take steps, where practicable to reduce your energy consumption and spends, this can be simple tasks such as turning down the heating by a degree or two, keeping doors shut to retain heat and optimising low-cost periods for high consuming equipment, such as evening, night, or weekend rates (if applicable to your meter)
  3. Engage – Find a trusted, reliable broker to support your energy purchasing. A good broker will review contract offers and explain their differences and their impact to your business, do not be forced into signing a contract that you do not understand.

Tribe Energy boasts over 15 years of expert energy experience, supporting small businesses to large national infrastructures. Our team are impartial and committed to delivering the best advice and service available. If you have questions and want a no-obligation discussion, get in touch today.