News

Spring has most definitely sprung and business leaders have put thoughts of winter (and excessive heating bills) well and truly behind them. But industry analysts are already warning of possible gas price spikes which could plague homes and businesses this coming cold season.

Winter is coming

Yes winter might have only just subsided, but energy industry analysts live and die by their powers of foresight. Suppliers, governments and energy users would be foolish to ignore their advice.

What is the issue?

As is often the case with the energy industry, there are a whole host of factors which could affect the unit price of gas which appears on your bill. The most fundamental in this case though is that there have been difficulties in refilling the UK gas storage facilities. The UK has incredibly small gas storage potential at the right of times, and this year the tough winter has taken its toll. We enter May with some of the lowest stores of gas on record. Analysts like Carbon Point believe that we will face significant problems trying to refill our stores before October. Energy industry experts have warned that this stunted supply could put the nation at risk of shortages and price shocks. The effects of this reduced supply will be complicated by other geopolitical factors which will have both direct and indirect consequences for Britain. The UK usually sources much of its gas from sources in Norway and the Netherlands, but for the time being at least the amount of gas we can draw from these sources is restricted. This means we shall have to interact with more continental European markets which are becoming increasingly dependent on supply from Russia. The ever complicated relationship between Europe and Russia has been well documented in the news recently. The EU’s recent allegation of market dominance by the state-owned gas giant Gazprom has the potential to strain the relationship even further. A stressed EU-Russia relationship could also lead to more supply disruption and steeper gas premiums paid by European energy-users – as was the case at the height of the Russia-Ukraine dispute. In short, low storage capabilities in the UK coupled with uncertainty about the reliability of Russian supplies could lead to price increases as we enter the colder months.

Who is at risk?

At this early stage it is difficult to tell who will be most hurt if these concerns become reality. However, because there is a lot of political pressure on energy companies to keep prices low, it is likely the suppliers will be bearing much of the risk. This is more likely if the coming General Election returns a Labour government. Suppliers though are rarely keen to take risks. They are known for increasing their energy prices far more quickly than they reduce them. At least some of the price burden will probably be passed on to consumers, especially if they are on more flexible contracts.

What can I do?

Solving the myriad of geopolitical imbalances which could cause these price hikes would be one way to go; but if this sounds a little beyond your personal capabilities, then there are steps you can take to protect your bottom line. The safest bet would be to take out a fixed price contract as soon as possible. As the markets begin waking up to the possibility of future price shocks, the wholesale trading price of energy will begin to increase. You can protect yourself by fixing the price you pay for your energy for a set period of time – probably a year or two years. If your contract is not up for renewal until the winter months then don’t panic. In many cases, contracts can be renewed earlier than the agreed end-date. Speak to one of our expert energy advisers today to find out how you can avoid the price spikes which might affect you next winter. Call 0800 043 0423.