Homes face the prospect of higher electricity and natural gas bills if the war in Iran does not end in weeks, industry figures said at the weekend.
Oil prices fluctuated at about $110 a barrel early on Monday following US president Donald Trump’s threats on Sunday to target Iran’s infrastructure if the country does not open the Strait of Hormuz shipping lane. Crude prices are up about 50 per cent since the conflict began.
While motor fuel prices have soared, homes and businesses have so far been spared the worst impact of the crisis on their energy bills, said Dara Lynott, chief executive of industry group Electricity Association of Ireland.
Domestic energy suppliers buy most of the electricity and gas they supply to homes in advance, a practice known as hedging, which Lynott said protects customers from current price volatility.
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While suppliers will not comment directly on plans to increase prices, industry figures caution that the longer the conflict goes on, the higher the risk that electricity bills will increase.
One source at a leading energy supplier said the risk would ease considerably if the war ends in a few weeks, as Trump has predicted. However, should the war continue much longer beyond that point, there would be “upward pressure” on prices, they said.
Energy industry sources say that although natural gas prices surged immediately when Russia invaded Ukraine in February 2022, it took several months to see the impact on energy bills.
Natural gas prices ultimately determine what consumers pay for electricity, says Lynott, whose organisation represents suppliers including the ESB, Bord Gáis Energy, SSE Airtricity and others.
[ Trump threatens to escalate strikes on Iran unless it opens Strait of HormuzOpens in new window ]
He said prices of the fuel in Britain, one of Europe’s leading markets, were up to about £1.67 per therm (the unit in which it is traded) recently, from about 70p in January, a month before the US and Israel attacked Iran.
Other observers said prices have tended to hover at about £1.20, depending on particular contracts. The figure was almost £1.27 when the market closed in advance of the Easter weekend on Thursday. It opened that day at £1.30.
Prices topped £6 at one point in August 2022 as the Ukraine war closed off supplies to Europe. Lynott said they have come “nowhere near” that level as a result of the Iran conflict and the closure of the Strait of Hormuz.
However, the conflict continues to hit energy supplies to the rest of the world. News agency Reuters reported that two tankers loaded with liquefied natural gas (LNG) from Qatar turned back after attempting to pass through the strait on Monday.
Had they gone through, it would have been the first successful passage since the war broke out on February 28th, Reuters stated.
Europe has relied increasingly on LNG shipments, particularly from the US, since the Ukraine conflict disrupted supplies from Russia,Lynott said. The EU has also focused more on building up stocks held in storage, he said.
Although this country does not have its own LNG terminal or natural gas storage, it benefits from this approach, Lynott said.
The industry lobbyist said suppliers’ hedging policies are insulating homes and businesses from current energy price volatility. “Hedging is protecting customers,” he said, adding that industry regulators have confirmed this several times.
While each supplier has its own strategy, he said, the overall process “smooths out” sharp price movements, giving customers predictable prices.
In the longer term, the Republic needs to continue investing in renewable energy to cut its dependence on imported fossil fuels, Lynott said. He said the Republic also needs to build natural gas storage to help secure energy supplies.
