Yahoo Finance Gas prices surge to new records as fears of winter crisis deepen
Gas prices in the UK and Europe have surged to fresh record highs after fears of a winter supply squeeze returned.
As colder temperatures set in and flows from Russia to the Continent dropped, the UK gas price rocketed to a new high of 470p per therm on Tuesday - more than the previous record of 407p reached in October.
At the same time, EU natural gas prices also hit a record, prompting France to fire up plants with heavy fuel oil, which is one of the dirtiest fossil fuels, to ease the strain on its power grid.
The price of buying electricity in France in February surged to €1,000 per megawatt hour, suggesting investors fear the situation will worsen over the winter months.
Meanwhile, forward prices for 2022 and winter 2022-23 have also rocketed as traders bet that the crisis could drag on for years.
Analysts at Investec warned that the surge in prices would almost certainly lead to higher energy bills for millions of British households, as well as the potential collapse of more suppliers.
They blamed low storage levels across Europe, lower output from renewable sources such as wind and recent events that have squeezed energy supplies, including French nuclear shutdowns, delays to the opening of Russia’s Nord Stream 2 pipeline and the phasing-out of German nuclear power.
Markets were also left spooked after the key Yamal-Europe pipeline, which brings gas from Russia to Germany, switched to flow east, with western flows reducing.
In a note, Nathan Piper, Investec’s head of oil and gas research, said: “We believe this is not just a price spike. There is a high likelihood of both prolonged and even higher gas prices through winter with an impact that stretches out over the next two years.
“This has implications for major users of gas, including fertiliser producers with a follow-on impact on food costs.”
It comes after the broker separately warned on Monday that the energy price cap might rise to £2,000 in April, an increase of more than £700 on its current level, leaving households facing monthly bill increases of £60 per month.
Gas and oil prices surged this year as countries around the world began to emerge from draconian pandemic restrictions, and suppliers struggled to meet the rapidly growing demand.
The 10-year average UK gas price has been 50p per therm. Soaring costs have pushed 25 household energy suppliers out of business since November last year, leaving millions of families facing higher bills.
Bulb, which had 1.7m customers, is now being bankrolled by taxpayers after running out of money and being placed into a special administration regime.
The Government also had to step in in September to fund a fertiliser plant owner that had shut its sites owing to high costs, threatening a shortage of carbon dioxide needed for the food industry.
In September Boris Johnson described the gas price rise as "temporary" as global economies re-open from the pandemic.
But competition from Asia for global gas supplies remains strong while storage levels in Europe stay low.
Some experts have suggested this is linked to Russia constraining flows to the Continent, in an attempt to pressure EU authorities into approving the Nord Stream 2 pipeline to Germany.
