January 20, 2022

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Gas price rises again due to tensions on the Ukrainian border

Gas price rises again due to tensions on the Ukrainian border

Today it costs a MW gas About 119 euros in the Dutch wholesale market, where energy suppliers buy their gas. This is about the same as during the peak in October.

Then gas prices rose to record levels due to a combination of factors. The most important is that gas reserves in Europe this year are historically small and the demand for gas is very high because the economy in many countries is working again. Therefore, in severe winters, there is a risk of a shortage, which will lead to higher prices.

The main panic appeared to have subsided and prices have fallen significantly since mid-October. But now everything is on board again.

Fear of conflict

The build-up of Russian forces on Ukraine’s borders is causing a lot of tension. If a real conflict breaks out, this could also have serious consequences for gas supplies in Europe. An important gas pipeline from Russia to the European Union passes through Ukraine. If these deliveries are halted, the chance of a shortage in Europe will be greater.

In addition, Germany recently threatened to use the main Nord Stream 2 gas pipeline, which is not yet operational, to punish Russia if it invades Ukraine. In any case, traders have been worried for some time that the pipeline through the Baltic Sea will no longer be operational this winter, due to the lack of a permit.

This year’s hike in gas prices will have severe consequences for businesses and households. In the Netherlands, many small energy suppliers have already gone bankrupt because they simply can no longer afford to buy gas.

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virgin families

For most families, the energy bill will also rise sharply in the coming period. Energy suppliers pass on higher purchase prices to their customers. Anyone with a variable contract, where prices are adjusted at least once a year, and everyone with a contract that must be renewed, will therefore pay a much larger amount.

So earlier the Cabinet decided to compensate all the households for the high energy bill.