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HomeRenewablesEditor’s PickGas rush could hike UK energy bills and inflation

Gas rush could hike UK energy bills and inflation

The UK may see rising energy bills and inflation this winter due to a possible dash for gas, according to LCP Delta’s Power Insights analysis.

Sam Hollister, Head of Economics, Policy and Investment at LCP Delta, noted that despite recent declines in global energy prices and UK inflation, there are signs that energy costs could increase again in the autumn.

Following high gas stock levels in the spring, energy prices had decreased, contributing to a fall in UK inflation to 2.3%.

However, current trends suggest that these gains could be reversed.

With gas storage levels declining and supply risks persisting due to the conflict in Ukraine, there is a risk of rising energy costs this winter.

Since Russia’s invasion of Ukraine, Europe has relied heavily on inter-seasonal storage for winter gas supply.

Yet, these stock levels are being depleted as LNG exports are redirected from Europe to higher-priced Asian markets.

European gas storage is currently at 72%, but this figure does not account for potential disruptions, such as attacks on Ukraine’s energy infrastructure or conflicts in the Middle East affecting LNG trade routes.

These factors are causing traders to anticipate tighter gas supplies later in the year, which could drive up prices.

If Ukraine’s gas storage is compromised, Europe’s storage buffer would fall further, increasing the likelihood of a scramble for gas by utilities to prevent winter shortages.

Speculative trading in the gas markets is already betting on tight supplies, which would elevate gas prices and subsequently raise energy bills for consumers when the October energy price cap is set.

The next two months are critical for monitoring gas storage levels. If deliveries do not increase soon, prices could rise significantly, leading to a potentially expensive winter.

Speculative traders are currently buying gas on the assumption of a tighter market, which could result in a sharp increase in the January energy price cap if storage levels are not replenished.

Energy Live News
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This article first appeared on Energy Live News, an award winning news service. Their mission is to give you balanced news, analysis, commentary of energy from their dedicated team of quality journalists and production staff.
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