The UK is ramping up imports of LNG, but consumers are unlikely to see relief

The UK bucked the European trend of higher wholesale gas prices as LNG cargoes eased shortages that drove up prices last year and kept them there. But consumers won’t feel comfortable with the prices anytime soon.

Bloomberg mentioned This week, the UK’s next day price of natural gas has fallen to around €156 or $164.88 per megawatt-hour this month. By comparison, the average price for next-day gas in Germany is €210 or $220.84 per MWh, and in France it is €213 or $224 per MWh. In Italy, prices are higher despite the country having access to a gas pipeline from Algeria, at 241 euros or $253.44 per MWh.

But there are more factors that go into consumer pricing.

The UK has boosted its LNG imports in recent months amid the heating season, but recently, with the weather starting to warm and energy demand for heating waning, the country has started to run out of storage space for all the LNG that Bloomberg was importing. mentioned Last month. The report noted that it could not even export it entirely to the European Union due to capacity limitations. While that’s good news for power utilities that run on gas-fired plants, all of this won’t make much difference to the end consumer, according to a recent Telegraph. Report. According to the report, energy market regulator Ofgem plans to extend a rule requiring electricity suppliers to pay existing suppliers to consumers if they want to offer them lower prices. This will likely discourage utilities from offering such rates, no matter where wholesale prices fall.

Meanwhile, the UK’s living crisis is accelerating, caused in large part by energy prices. One of Britain’s largest energy suppliers, ScottishPower, warned This week, families will need to prepare for another big hike in annual electricity bills after Ofgem raised its price cap again in October.

“Suddenly, this crisis will be affected by a whole group of people who never found themselves in debt and never struggled to pay their bills,” said the CEO of the facility. quoted by Financial Times. “Time is running out fast. Let’s go into a room and come up with solutions now,” added Keith Anderson.

The medium-term outlook is also not very rosy, despite the current drop in gas prices. Investment bank Stifel reported earlier this week that the current level of volatility in natural gas prices is not going anywhere in the next three years, extending a cost-of-living crisis in one of the world’s richest countries.

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“We see energy markets remain narrower than previously expected in 2024/2025; for oil, we increased our long-term oil price assumptions from $65 per barrel to $70 per barrel for 2024 and beyond, reflecting higher long-term supply risks,” the analyst said. In Stifel’s Chris Whiton, “We also now expect high UK gas prices to continue into 2025.” quoted by City AM

The factors driving this volatility range from ongoing disruptions in the supply chain and rising LNG prices as the world teeters in shortages. According to Stifel analysts, the UK will not be able to protect itself from the effects of this shortage even if it boosts domestic gas production. Reason: lack of investment.

“The global LNG industry has been struggling with the availability and capacity to produce the LNG that its customers need — a combination of issues with maintaining an aging fleet of liquefaction capacity, but also declining natural gas supplies after years of underinvestment,” Wheaton said.

In other words, the current drop in prices is a temporary development that will not continue anywhere soon enough to make a measurable difference in the prices that UK consumers pay for electricity. This does not bode well for the UK economy or, in fact, the EU economies, which are struggling with rising gas prices.

By Irina Slough for Oilprice.com

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