Day ahead natural gas prices jumped another 78p today to 355p per therm, a rise of almost a third in just a few hours. Jim Reid, a strategist at Deutsche Bank analyst, called the price moves “astonishing”.
UK natural gas prices have been soaring since summer, repeatedly reaching new all-time highs. Gas is already well above the previous record of 120p per therm reached in 2018 when the “Beast from the East” cold front battered the British Isles. Prices have surged nearly 500% so far this year.
Sky-high energy prices are stoking fears about the effect on the economy. Factories have already been forced to shutdown due to costs and consumers are likely to face soaring bills next year when the energy price cap is next reviewed.
“This is a big deal,” said George Saravelos at Deutsche Bank. “The importance of these moves on inflation, growth and external accounts are not to be underestimated.”
Natural gas prices have soared across Europe due to an unlucky constellation of factors. An unusually bad year for wind power has coincided with a long winter and hot summer that ran down gas supplies across the continent. A Covid reopening boom is driving a surge in demand, with China and Latin America buying up global suppliers of liquified natural gas. Supply from Russia has also been weak.
Experts fear a cold winter could push Europe and the UK deeper into an energy crisis.
Russian President Vladimir Putin this week said “hysteria” in the market was caused by a muddled approach to net zero adopted by the West.
“Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition,” he said according to a Reuters report.