Last week the EU's gas market rose by 5%, which is the highest it has been in a year.
An Austrian-owned gas trader, OMV, has been compensated by a subsidiary of Russian Gazprom. This could lead Gazprom to halt supplies into the EU.
OMV was awarded €230m in the court case from Gazprom. The company plans to recoup this money from the gas giant by withholding monthly payments for gas. However, some are worried that by doing this Gazprom will retail by withholding supplies.
Since last November, the EU's gas prices have gone over €45 mWh. The EU could face high risks of tight gas supplies if OMV's gas supplies are cut off.
How does this affect the UK?
The UK's gas market is linked to the EU since we import a lot of our gas from there. This led the price of wholesale gas In the UK to jump by 3%.
Despite the UK's partial reliance on the North Sea gas production, we still import substantial energy from European sources to meet overall demand.
Additionally, as energy prices surge, the UK faces broader economic impacts, such as increased inflation and higher production costs for industries, which can trickle down to consumer goods and services. This situation strains households and businesses, leading to economic challenges and potentially slower economic growth.
Winter demand pushing prices up
Along with rising gas prices in the EU, another thing that could affect UK energy prices is colder weather pushing up gas demand. In the winter gas prices can spike due to many different weather-related issues such as:
- Increased demand - In the winter, colder weather increases gas demand due to heating needs.
- Falling wind & solar power – colder weather can also lead to a lack of renewable generation due to less wind and sun.
- Imports – With lower supplies and higher demands, the UK is more likely to have to rely on expensive imports in the winter months.
How will this affect your business?
Higher energy prices
Wholesale gas prices going up will have a knock-on effect when it comes to your energy renewal. If you don’t renew before prices get too high, you could get stuck in an expensive contract that would take a big part of your budget.
Decreased profits
Higher energy prices could lead your business to have to put prices up or make business changes that could affect customer retention. This will lead to a loss of profits over a period.
Operational challenges
Higher energy prices could also force your business to make changes to your operations. For example, you might have to consider shorter opening hours to ensure you don’t overspend on energy.
Decreased consumer buying
Higher wholesale gas prices affect everyone and cause the cost of living to rise. As the cost of living rises, consumers have less disposable income to spend on businesses. This can cause profits to decrease again for your business.
What can you do to reduce the impact on your business?
Make sure your business is on the right energy contract
One way that you can save money is to ensure that you are on the right energy contract. If you are on out-of-contract rates or a variable contract, you could end up overpaying a lot for energy when prices rise. Within a volatile market, we would suggest remaining on a fixed contract as this ensures price stability for your business.
Reduce energy consumption
Another way that you can reduce your energy costs is to reduce how much energy your business consumes. There are many different ways your business could do this, such as:
- Energy-efficient equipment
- Voltage optimisation
- Peak demand reduction
- Educate employees on energy saving
Read our blog on how to save money on your energy bills to find more ideas.
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.
