Energy expenses are expected to rise this summer as frigid temperatures and a shortage of sources threaten to push up wholesale fuel prices.
Experts warn that price signals confirming the UK’s economic crisis continue to hurt households, despite hopes of prices peaking until 2025.
Dr Jack Sharples, senior researcher at the Oxford Institute of Energy Studies, explained how the wholesale fuel market has tightened amid Russia’s war in Ukraine and Europe’s shift away from Russian fuel towards other countries, particularly the United States. United States, Norway and Azerbaijan.
He said Europe will lose 15 billion cubic meters (BCM) of fuel this year, accounting for 4% of its source in 2024. This is enough to tighten the market a bit more in an already tight global market for liquefied vegetable fuels (LNG).
The expert said forward prices are “ever so slightly” higher for the summer months of 2025 than for the winter of 2025-26.
Britain and Europe expect an increase in LNG on the market by the end of 2025, with supply growth expected to outpace demand and drive prices down, but not for several months. But costs are expected to remain elevated until then.
Consumer gas prices in Britain are calculated from a combination of forward and historic prices. Dr Sharples said the expectation could be that prices remain high, but flat, and possibly won’t drop this summer.
READ MORE Tragedy: a 28-year-old British man dies in a twist of fate on a motorcycle while on holiday in Thailand
He warned that if a new cold snap hits Europe or East Asia suffers a more severe winter, demand for LNG will rise and costs will rise again.
Dr Sharples said: “When the market is finely balanced and tilts towards one side of the scale or the other, you get a much more noticeable value reaction.
“If the supply fell below five percent, then we would have to turn to the global market and offload more volumes. That’s why the costs are where they are now. But we are at the peaks of the 2022 prix. de. “
Danni Hewson, Head of Financial Analysis at AJ Bell, said reports of pressure on gas supplies show the country is yet to fully emerge from the cost-of-living crisis.
She said: “It’s worth pointing out that prices and storage levels aren’t anywhere close to 2022 levels, but as a cold snap currently has many of us nudging the heating on for a few more hours, any hint all is not well is cause for concern.”
Ms Hewson added that while the UK is using more renewable sources of energy when it comes to electricity generation, heating our homes is a different matter.
Britain recently reached a major milestone when wind overtook fuel as the largest source of electrical power for the first time in 2024.
Don’t miss… Health officials confirm first bird flu-related human fatality as man. 66, dies [REVEALED] Major motorway shuts as lorry smashes into central reservation [REPORT] Boy, 15, has leg amputated after hit-and-run on cycle home days before Christmas [LATEST]
The expert said: “With the wholesale increase, this risks causing even more pain for UK families in the coming months, especially if this winter is long and cold.
“Many people had hoped 2025 would be the year when the cost-of-living crisis was put to bed for good, but there are little signs everywhere that prices aren’t playing ball.”
A Department for Energy Security and Net Zero Spokesperson said: “We have no concerns and are confident we will have a sufficient gas supply and electricity capacity to meet demand this winter, due to our diverse and resilient energy system.
“Our project to make Britain a white energy superpower will ensure the UK’s long-term energy security, by investing in local white energy and protecting bill payers. “
The government insists that garage fuel levels vary during the winter and operators have estimated there will be enough supply to meet the country’s demand for this winter.
A recent report on legal security of sources concluded that Britain has enough electricity and fuel to meet customer needs in the short and long term.
Before Russian President Vladimir Putin ordered his troops to invade Ukraine, the European country with about 30% of the continent’s oil pipelines. After the invasion, the volume of fuel coming from Russia decreased significantly, forcing the European market to rebalance.
We use your registration to provide content in the manner in which you have consented and as we perceive you. This would likely come from our and third-party advertising as we perceive it. You can unsubscribe at any time. Read our privacy policy
Gas has soared, Europe has imported more LNG from the global market and consumers have limited their energy consumption as energy costs soar. Dr Sharples said Europe’s commercial sector has been the hardest hit by the energy crisis, with Eastern European countries such as Slovakia. , Germany and Austria are among the most affected.
In 2021, Europe obtained 142 billion cubic meters (MMC) of fuel from Russia. By 2024, this figure had dropped to 30 billion cubic meters. The fuel market was further affected when Ukraine earlier this month shut down a pipeline carrying Russian fuel to Europe.
Fuel inventory grades in Europe are “quite healthy”, according to Dr Sharples, who said Gas Infrastructure Europe figures this week showed garage grades at 69 per cent.
He explained that storage capacity differs between the UK and Europe, with the continent storing around 106 billion cubic meters at the start of winter, compared to around 3 billion cubic metres.
In fact, the UK is a winter reserve, as it traditionally relies on its own materials. The country is now “well connected” with materials from Europe and Norway, allowing it to take inventory when needed.
Dr Sharples warned, however, that the main factor now is how much fuel will be stored in the UK and Europe at the end of this winter. He said: “Everything we have taken out of inventory until the end of March needs to be reinvented. ” during the summer. “
He explained that analysts already expect that they will want to buy more fuel from this year until 2024, but this could cost the country more given the situation of wholesale prices.
Natural gas futures rallied above 125p per therm last week for the first time since October 2023. The price dropped back to 121p on Tuesday amid forecasts of milder weather next week, according to Trading Economics.
It put European gas storage at 70% capacity, down from 85% last year. Trading Economics said this leaves the UK “vulnerable” to supply disruptions because of its “limited storage and reliance on European infrastructure”.
RESEARCH
CONNECT WITH US
PAPER OF THE DAY
View today’s front and back covers, download the newspaper, request previous issues, and use the old Daily Express newspaper archive.
EXPRESS. CO. UK
Would you like to receive notifications from Daily Express?