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Russian ‘Energy War’ Causes Further Concern and Price Surges

Market Summary

August 2022

The energy crisis has hit new highs again this week following the announcement that the Nordstream 1 gas pipeline is being taken offline for three days for emergency maintenance.

This appears on the surface like another ‘Energy War’ tactic from Russia, creating massive concern across Europe over whether the pipeline will come back online this year.

On top of this, the reopening of the Freeport Liquified Natural Gas (LNG) facility in the US has been pushed back to November. This produces around 20% of US LNG exports, with half of those earmarked for Europe to ease gas supply issues.

The heatwave across Europe has caused further issues for energy supplies with low water levels stopping coal deliveries, nuclear reactor cooling and reducing hydro generation. Despite this Europe has managed to hit its target gas storage for the winter ahead.

These global impacts are having a catastrophic impact on gas and electricity prices which have continued to surge to alarming levels we wouldn’t have thought possible. This is a huge challenge for all of us, and there’s still no energy price cap for businesses. We recently published a winter pricing update which has seen gas prices increase by over 700% in a year.

Electricity and Gas Prices

Electricity Prices - 31 August 2022

Gas Prices - 31 August 2022

On Tuesday we saw the UK, Germany and TTF forward curve prices decrease by 30, 17 and 25% respectively which helped to ease prices below the £1 per kWh mark. Unfortunately, this reduction has only retraced the increases seen over the last 2 weeks with more rises anticipated over the coming months.

Gas & Electricity - August Prices

EPEX Price

Our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over eg a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.

The EPEX price currently on 24th August is 36.98 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 49 p/kWh+.

Carbon Prices

Carbon Prices

Carbon has been on a roller coaster this month, increasing by 30% from €76.54 to €99.67, caused mainly by coal being used across Europe to combat rising gas prices. Fears of demand destruction, potential closing of sites, inflation and higher interest rates have pushed down the price of carbon which fell by 19% closing at €81 p/tonne on the 31st August.

Oil Prices

Oil Market

The beginning of the month saw prices rise following OPEC indicating it’s readiness to reduce output to correct a slump in oil prices.

Brent crude oil prices have declined recently to trade below $100/bbl. This is down to concerns over Chinese Covid lockdowns and interest rate increases reducing demand.

Contact Us

For help and advice with your business energy contact our team.

0114 327 2645


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