UK gas prices jumped 17 per cent in a day after two more energy firms collapsed, with consumers now being warned to brace for bills soaring by £475-a-year amid new fears about European supplies.
After a German energy regulator withheld approval for a Russian-oil pipeline, which would have carried Russian gas through the Baltic sea to Germany and Europe, concerns about a possible winter energy crisis were raised again Tuesday.
The United States has imposed sanctions on Nord Stream 2’s construction. Many European countries strongly oppose it. They believe that the Nord Stream 2 pipeline is being built to keep Ukraine from paying transit fees in order to ship Russian gas.
The delay came hours after Boris Johnson told the EU it must choose between Ukraine’s freedom or buying gas from Moscow when he linked the £9 billion pipeline project to growing tensions in the East.
Consequently, wholesale prices rose across Europe as fears arose that Russia would not allow gas deliveries to increase via other routes if Nord Stream 2 is shut down.
Wholesale gas in Britain was worth around 60p per therm at the start of 2021, but that figure reached 240p per therm on Tuesday.
The record of 350p, set in October early this year, is still intact.
The 750-mile Nordic Stream 2 pipeline would carry Russian gas directly across the Baltic to Germany and wider Europe
The map shows the points of origin/destination of Nord Stream 2 (solid line), and Nord Stream 1 (dotted line). It is between Russia and Germany. Putin hoped Nord Stream 2 will be completed two years ago. This would allow Russia to bypass Ukraine’s south. The pipeline carries half of Russia’s gas via Poland.
Another concern is that this surge could push more vulnerable energy suppliers into the brink in the next few weeks, adding to pressure already felt by heavy industries.
Two more small suppliers – Neon Reef and Social Energy Supply, with a combined 35,000 customers – collapsed after the price hike.
Trafigura, an influential trader, has warned that Europe might experience a ‘rolling blackout’ during the winter months as a result of a shortage in gas.
German officials have said the suspension was ‘temporary’ and the decision was seen as a technical, rather than political, one.
Although Nord Stream 2 is led by Russia’s Gazprom, Germany’s Federal Network Agency (FNA) said the Swiss-based consortium running the European end of the project would need to form a company under German law to obtain an operating licence.
It comes after Western politicians – including Defence Secretary Ben Wallace – accused Moscow of using the pipeline to deprive Europe of much-needed gas supplies and drive prices to record highs.
Russia is also being accused of decreasing supplies via existing routes to try and pressure Germany into agreeing.
Despite fears, though, Mr Johnson maintained the UK’s opposition to the pipeline citing concerns it ‘would have significant security implications for the region’.
Russian President Vladimir Putin has been accused of using the pipeline issues to deprive Europe of much-needed gas
German Chancellor Angela Merkel. On Tuesday, regulators withheld approval of the pipeline.
It is believed that the price rise was also caused by lower flows of Norwegian gas to the UK as a result of an outage at Troll’s gas field.
Analysts at Energyhelpline said if the prices seen on Tuesday were to continue until February, the UK energy regulator Ofgem could raise the cap on household bills on standard tariffs by £475.
This would take it from the current level of £1,277 to £1,752.
Nord Stream 2’s 750-mile pipeline was completed in September but still needs regulatory approval.
It would allow Russia to double its gas exports to central Europe if it is granted the go-ahead. This would also enable Moscow to avoid Ukraine.
Although the UK does not import much gas directly from Russia, it receives a lot from Europe – which gets around 40 per cent of its supplies from Russia.
British prices rose further following a September incident at France’s subsea power cable that cut off electricity from Europe.
Prime Minister Boris Johnson told the EU it must choose between Ukraine’s freedom or buying gas
The sky-high prices have been seen most profoundly in the UK through the sudden collapse of a string of small energy suppliers – with more than 20 going bust since the start of September.
Cornwall Insight’s analyst Sam Peek stated that prices will continue climbing through next week, if it is cold or there are periods of low wind.
Downing Street stated that Mr Wallace was visiting Ukraine and the Government would continue to talk to European Allies as well as Kiev about the pipeline.
‘Ukraine currently hosts the largest existing pipeline for Russian gas and transit fees have historically made up a large proportion of their GDP so Nord Stream 2 would divert supplies from the Ukraine that would have significant consequences for its economy,’ the Prime Minister’s official spokesman said.
‘And it could also have significant security implications and the transit of Russian gas through the Ukraine is largely seen as a deterrent against further Russian aggression.’