A severe cold snap spreading across eastern Europe as well as a severe coldness in the relationship between the EU and Russia has put fresh pressure on wholesale gas prices which could mean more misery for Irish consumers in the weeks ahead.
Utilities in Ireland have imposed multiple price increases on domestic users in recent months with the cost of annual bills climbing by anywhere between €500 and over €1,000 depending on the provider, usage levels and the nature of the contract consumers have.
The Government has announced plans to offset some of the price hikes with a €100 rebate covering the first two months of next year but much of that rebate could be cancelled out if wholesale prices remain high and providers here increase their prices further.
Wholesale gas prices soared to record highs this week after concerns over Russian manoeuvres in utility markets.
Russia supplies round 35 per cent of Europe’s gas and there are concerns that Russian president Vladimir Putin might restrict supplies into Europe to try exert political influence. Particularly in relation to Ukraine.
This is being denied by Russia but markets have become hyper sensitive to any suggestion or evidence that Russia might stop the flow of gas into Europe.
This week, the Yamal pipeline, which brings gas from Russia through Poland and into Germany, began sending flows back east, a move which some observers said was the start of a mini energy war by Russia, a claim the Russian authorities deny.
According to Daragh Cassidy of price comparison and switching site bonkers.ie, there has been an eight-fold increase in the cost of gas on UK markets over the last 12 months.
Covid is also behind some of the increases having created a lot of supply chain bottlenecks that disrupted supply chains worldwide, he continued.
Mr Cassidy noted that the price of gas “almost always goes up during the winter months as demand invariably increases due to cold weather. And this is what we’re seeing now as some quite severe cold is sweeping into Russia, Scandinavia and eastern Europe. The problem is that the increase is coming on top of prices that are already at record levels.”
The impact on households from all this could be severe but it largely depends on how long prices remain at such elevated levels, suggested Mr Cassidy.
“A lot of the increases in wholesale gas prices this year were not fully passed on to Irish consumers in the hope that prices would ease back. But as we can see, that’s not happening.
“However gas and electricity prices in Ireland have ‘only’ increased by between around 25 per cent and 70 per cent So you can see where things might be going the longer this goes on.”
He noted that between 40 and 50 per cent of our electricity is still generated from burning gas so an increase in gas prices also has a huge impact on our electricity prices.
While Ireland gets most of its gas from its own reserves and the UK, which in turn imports a lot of gas from Norway it has little direct exposure to Russia. “But if Russia turns off the taps for Germany, then the Germans will have to look elsewhere (to Norway for example) and this would then affect us,” Mr Cassidy warned.