High volatility

In response to the scale of Russia’s invasion of Ukraine, energy markets rallied last Thursday, at the end of February. Prices remain highly volatile but have since retraced a lot of the increase seen last week, which was viewed as a knee jerk reaction.

Prices are being largely driven by the risk of uncertainty but recent developments have confirmed expectations that Europe cannot accept Russian gas; namely Germany has confirmed they will halt Nord Stream 2 until the situation in Ukraine deescalates and BP have opted out of the pipeline altogether.

Although Russian gas only contributes around 4% to the UK system, the supply glut in Europe will cause Norwegian gas and LNG prices to rise which we, the UK, heavily rely on.

This uncertainty has meant that many suppliers are refraining from pricing new contracts. Many will only open new business tenders with a view to only price renewals and site additions. This is for both fixed and flex contracts, gas and power.

Impact on future contracts

The impact of the war in Ukraine has seen future contracts move closer to the already high prices we’re witnessing for the coming 2 years. It’s widely expected that gas & electricity markets won’t return to the levels we saw last year and that the new norm will be nearly double the average we saw previously (bills will see a lesser impact due to the fact that non-commodity rates are increasing at a much slower pace).

More reliable, sustainable energy

Europe are embarking on a new journey which eliminates dependence on Russia for its energy; the road will be bumpy at first but this could mark the beginning of a more reliable and sustainable future for energy.