Gas prices in Europe plunge to their lowest level in 18 months, but households are unlikely to benefit from cheaper bills before summer
Gas prices in Europe have plunged to their lowest level in 18 months, but households are not expected to benefit from cheaper bills until summer.
Mild weather and increased storage capacity have meant natural gas prices in Europe are at a similar level to what they were before Russia’s invasion of Ukraine sparked an energy crisis .
The benchmark price fell below €50 (£44.50) per megawatt-hour on Friday, a far cry from the all-time high of €320 in August last year.
It was last seen at this level in September 2021, according to the Financial Times. However, it will take months for the drop to trickle down to consumer bills as energy companies buy their supplies in advance.
The energy price cap, which protects consumers from runaway increases, is set to rise further from £2,500 to £3,000 in April.
Feel the heat: The energy price cap, which protects consumers from runaway increases, is set to rise further from £2,500 to £3,000 in April
It is based on the average cost of gas over the past few months, rather than the current price.
Tony Jordan, senior partner at energy consultancy Auxilione, said: “Unfortunately we won’t get the full benefit for the current price before the price cap decision in July.
“The reason we won’t see it yet is because of the reckoning period.”
He predicted the cap would drop to £2,000 this summer as lower prices begin to ease the burden on struggling families.
Soaring gas and electricity bills led to the UK’s cost of living crisis and fueled double-digit inflation.
Analysts predict that lower petrol prices will help the Bank of England “a lot” to bring inflation under control and could also lead to a lower peak in interest rates. There is speculation that Chancellor Jeremy Hunt could provide further support to households in the budget next month by delaying the price cap increase from April and keeping the cap at £2,500.
A Whitehall source said there were currently “no plans” to do so.
A mild winter and reduced energy demand have allowed EU countries and the UK to build up their energy stocks in recent months and find alternative suppliers to Russia.
This was key after Vladimir Putin cut gas exports to Europe in retaliation for sanctions imposed for his war in Ukraine. The crisis has laid bare Britain’s dependence on foreign supplies and led British gas owner Centrica to reopen the Rough gas storage facility, which it closed in 2017, in the aim of increasing the reserves of the United Kingdom.
Energy storage installations are now at their highest five-year average across Europe, leading to a significant drop in wholesale prices and easing fears of outages.
However, Jordan warned that energy markets are still very “sensitive to global events”.
“Things are looking up, but we’re not out of the woods yet,” he said.