What is affecting energy prices?

If you are reading this blog, then you are probably already aware of the spike in energy prices. But why have they increased? What has happened to cause this spike? When will prices decrease again? This blog intends to provide answers to these queries.

Why have energy prices increased?

Energy prices in the UK have skyrocketed, however, the issue is an international one. There are numerous reasons for the increase in price the combination of which has led to the situation we are all in now.

Gas reserves throughout the world are extremely low, currently, Europe is at an all-time low due to political reasoning and due to demand from China with Russia sending most of its supplies East rather than West.

The Nord Stream 2 Pipeline

The Nord Stream 2 Pipeline is the new gas line that will flow gas from Russia direct to Germany under the Baltic Sea. The project is complete the pipeline is filled with gas however due to German law this has been held up causing further stocks to Europe to diminish. The hope is that European consumers will benefit from lower gas prices when the pipeline becomes operational.


When will Prices Decrease?

Unfortunately, we are unable to estimate a price decrease due to the prices relying upon unforeseen global conflict. Prices are unlikely to fall in 2022- the price cap is estimated to rise to as much as 30%. The US has assisted recently with LNG supplies to Europe hopefully this will have an impact but time will tell on this.

We are all watching with interest the potential conflict between Russia and Ukraine as Gas supplies to Europe will potentially be used as a bargaining chip. The bubble will burst at some point this cannot continue, the sooner the better. Many Domestic & Commercial supplies will be affected by this, and this will have a detrimental financial impact.

Our Advice

Due to the uncertainty, we recommend not signing any long contracts such as 5 years. Long contracts are not smart when the prices could drop within a couple of years, leaving you tied into paying high rates. Our company embodies honest brokering so we will always advise our customers on their best move without sugar-coating or false promises being made.

For help, advice, and inquiries on new/renewing contracts, get in touch today!