In 2022, the already-high price of gas skyrocketed even more due to Russia's invasion of Ukraine. This caused a dramatic shift in the EU gas market, as exports between EU and Russia virtually ceased. This created an enormous strain on energy consumers, who were forced to pay out of pocket for these high prices.
In a time when economical issues are already plentiful, this further drained people and governments alike, leaving many businesses anxious to see some sort of relief from this unexpected expense.
It has been an interesting year with regard to gas prices. In August 2022 prices peaked at 875p/therm in the gas market. Going into 2023 we can already see a shift towards lower prices as the price of commodities was down 4% to 178p/therm as of last week. This is even lower than before Russia invaded Ukraine.
With gas prices as low as they currently are, this is the best time for businesses to sign a new contract and lock in these current prices. It would be wise to act now as prices could easily begin to rise again.
Why have gas Prices fallen
Gas prices have been falling recently, surprising many people as this time of year often sees rising energy costs due to colder temperatures. However, it appears that warmer weather in the UK and EU is partly responsible for the recent drop in gas prices, as is an increase in gas storage levels in the EU. This has been good news for consumers and businesses alike and shows that with some cooperation between countries, everyday consumers can benefit from more stability when it comes to the usage of vital commodities like gas. With competition between providers expected to pick up once again soon, now may be a great time to think about shopping around and finding the best deal on your energy supply.
Warmer weather reduces heating demand.
January typically sees cold temperatures and while this year promised strong winter weather, milder temperatures have instead blessed the UK and EU. While low temperatures can cause gas consumption to soar as people try to stay warm, the lack of cold has meant that energy demand from consumers has been much lower than expected.
This decrease has resulted in a 25% drop in the EU's gas consumption, which in turn has caused prices for energy to drop. These milder temperatures are proving advantageous for consumers wishing to save money on their energy bills.
More storage in EU Storage levels has risen.
The effects of the unusually warm winter weather in Europe are evident in European gas storage levels, as they remain tanked up above the typical 70% full by as much as 13%, a whopping 83%. This result clearly outstrips expectations that Europe would be relying heavily on its storage supplies to make it through a cold winter. With this relative abundance of gas and forecasting for average temperatures, Europe’s long-term energy needs appear to have been adequately covered. As spring continues to stride ahead, this secure supply could see storage be above 50% capacity by March this year. This is a lot higher than the 30% that was originally expected.
Prices could rise again...
Consumers should remain alert to the possibility of rising gas prices in 2023, despite current low prices. Chinese demand for LNG contracts has the potential to drive a spike in gas prices, especially when combined with anticipated struggles in Europe to replace lost gas supplies from Russia. Long-term forecasting could be inaccurate, however, it pays for all businesses to be wary of possible increases, and adjust their strategies accordingly. Now is the time to assess what rising gas prices mean for operations, and develop an action plan should such rises occur in the coming year.
What does this mean for your business?
For businesses trying to decide when to sign a new contract, it can be difficult to predict the future. The best option could be to act now and lock in the current prices while they're low. Waiting too long could mean that prices begin to increase, leaving businesses with fewer options down the line.
Ultimately, waiting for prices to drop further could end up costing more money and time if they rise again sooner than expected. Doing research on market trends can help businesses make smarter decisions regarding contracts as well as budgeting efforts in general.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.
