(PA)
(Picture: PA Wire)Don’t expect high gas prices to be a one-winter problem, with Russia’s invasion of Ukraine and the ongoing war likely to have a longer-term impact, according to research from a leading figure in the energy market.
Cornwall Insight warned today that the high prices seen this year are unlikely to return to “pre-2021 ‘normality’” this decade, although a supply shortage this year is unlikely.
“In all scenarios, gas prices in the UK are projected to continue to be impacted as the country’s heavy reliance on imported gas sees it vulnerable to global rises,” the consultancy warned.
“High prices, relative to pre-2022 levels, are unlikely to be a single winter problem, with high winter gas prices forecast to be maintained in 2023-24,” it said. For this year, it pointed out that the National Grid forecast that the UK had sufficient liquified natural gas (LNG) cargoes to last the current winter.
But with competition to secure LNG supplies likely to increase as supplies to Europe of piped Russian gas fall even further in 2023, “there are risks of continued high gas prices and sustained elevated bills for consumers as we prepare for, and then move through, next winter.”
Dr Matthew Chadwick, lead research analyst at Cornwall Insight, added: “If high prices are largely locked in for this winter, the big issue now is how much gas Europe will have in storage at the end of this winter and what this will mean for the costs of rebuilding inventories to meet next winter’s challenge.
“Our long-term forecasts indicate that gas prices are likely to remain high up until the end of next winter, without some radical change in the buyer-seller relationship between Europe and Russia.”
One industry measure of wholesale gas prices rose sixfold in the six weeks from the start of November, meaning that the government’s intervention in the market to keep household energy bills down is getting more expensive for the taxpayer.
Bill payers are protected by the government’s Energy Price Guarantee, which caps the annual cost of the average amount of gas used by UK households at £2,500 this year, although consumers will still pay for the amount of energy they use. It will rise to £4,279 from January.
The mild autumn into the recent December cold snap helped push demand for gas to heat homes deeper into this year. And while Cornwall Insight concedes that weather is a key variable to its forecasts, Chadwick added:
“This winter, despite a mild start, and impressive storage levels entering the colder period, we are in uncharted territory at least in price terms.”
