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After earlier this week’s threat by Russia to shut off gas supplies to Germany and other central European nations, gas prices have skyrocketed.
Gas prices in Europe increased by roughly 2%, trading close to the record high reached after Russia invaded Ukraine. According to critics, the Russian government is charged with exploiting gas as a political tool.
Russia has been reducing flows via the Nord Stream 1 pipeline to Germany, which is presently operating at less than a quarter of its typical capacity.
Prior to the Ukraine War, Germany imported more than half of its gas needs from Russia, most of it via Nord Stream 1, with the remainder coming from land-based pipelines. That had fallen to slightly over a quarter by the end of June.
The latest curtailment was attempted to be justified by Russian energy company Gazprom by claiming that maintenance on a turbine was required. However, the German government claimed there was no technical justification for doing so.
In order to impose “fear” on the populace, Ukraine has accused Moscow of waging a “gas war” against Europe and cutting off supplies. Poland has stated that by the end of the year, it will be completely independent of Russian gas.
Because it imports less than 5% of its gas from Russia, the UK would not be immediately impacted by a disruption in the gas supply. However, it would be impacted by higher pricing on international markets due to a European demand increase.
The third-highest price ever recorded for wholesale gas in Europe was €204.85 (£172.08) per megawatt hour. The price for a megawatt hour reached its all-time high on March 8 when it ended at €210.50 (£176.76). However, last year’s wholesale gas cost in Europe was a little over €37 (£31.08) per megawatt hour.
On Wednesday, gas prices in the UK increased by 7%; as a result, they are now more than six times more than they were a year ago. However, the peak seen following Russia’s invasion of Ukraine is still much below it.
One management firm has warned that an average energy bill might reach £3,850 a year by January, significantly higher than predictions earlier this month. UK energy prices soared by an astonishing £700 in April, and more increases are anticipated.
According to BFY, its projection reflected the rise in wholesale prices over the previous three weeks as escalating tensions with Russia sparked worries about winter supplies.
The most recent decrease in flows puts pressure on EU nations to further lessen their reliance on Russian supply and is likely to make it more challenging for them to restock their supplies in time for the coming winter.
European leaders have discussed how to lessen their reliance on Russian fossil resources since the Ukraine invasion.
EU agreed to reduce gas use.
On Tuesday, the European Union decided to reduce gas consumption in case Russia shut off supplies, but some nations will be exempt to prevent rationing.
EU nations have now decided to voluntarily cut their consumption by 15% from August to March. Nevertheless, after initially lacking exemptions, the agreement was softened.
The EU has warned that Russia is “continually using energy supply as a weapon” and that its goal from the agreement is to save money and store gas before winter. If supplies run low, the voluntary arrangement would become obligatory.
By the end of this year, the EU agreed to stop all maritime imports of Russian oil, but it has taken longer to get an agreement on gas import restrictions.
The cost of wholesale gas has already increased since Russia invaded Ukraine in February, which has had an effect on consumer energy costs all around the world.
The Kremlin attributes the price increase to Western sanctions, claiming that it is a dependable energy partner and is not to fault for the recent disruption of deliveries.