(Washington Insider Magazine) -The United States has urged Russia not to take advantage of the present gas issue. Jake Sullivan, the US national security advisor, warned the BBC that efforts to exploit the situation will backfire.
Natural gas prices have reached all-time highs as economies worldwide continue to rebound from the Covid crisis. As a consequence, companies that provide gas to residential customers are in financial difficulty since they committed to offer energy at a lower price than it costs them to purchase it.
Russia’s President Vladimir Putin has suggested that the country may increase supply, although some experts doubt this will ever happen. Russia seemed to be using the situation as leverage to get approval for its contentious Nord Stream 2 project.
In the present, Russia’s domestic gas market is constrained, with low inventories, production approaching its peak, and winter approaching in the country, further restricting gas export capability.
There is also little evidence that Gazprom – which owns the monopoly on Russia’s gas export pipeline, which provides 35% of Europe’s gas needs – is attempting to increase gas supply to spot buyers in Europe via existing routes, and given Gazprom’s limited maneuverability, it is improbable that it will supply more than 190 billion cubic meters to Europe this year.
This situation might have a detrimental impact on UK households. According to the BBC, National Energy Action estimates that between 1.2 million and 1.5 million more families would face fuel poverty in the UK. Around 4 million people currently live in fuel poverty, bringing the total to 5.5 million. The regulator, Ofgem, said that if wholesale gas prices keep going up, the price limit would need to be increased again next year.
According to analysts, this may result in an additional £400 to £600 on an average yearly bill in April, resulting in a 20% rise in families suffering fuel poverty. Due to the significant increase in energy prices over the last several weeks, many customers have expressed worry about their ability to pay their bills in the future months, when expenses are projected to rocket much higher.
Clare Moriarty, Citizens Advice’s chief executive, said that although fuel poverty definitions vary throughout the UK, it basically refers to individuals who must choose between heating and eating. According to her comments on BBC Radio 4’s Today show, the government has to prepare ahead.
An analysis provided by BBC’s Personal Finance Correspondent, Kevin Peachey For consumers and companies in the United Kingdom, the energy crisis is divided into three distinct phases.
To begin, let us consider the here and now. Domestic consumers have noticed an increase in direct debit requests and supplier invoices. They are, however, shielded by the price limit from the high expense of gas on the wholesale markets. Businesses, however, are not. Many are seeing immediate and significant hikes in their energy costs.
Second, as Ofgem confirms, substantially higher energy costs are unavoidable in the spring, possibly adding hundreds of pounds to a household’s yearly bill. That is something that consumers have no control over.
Thirdly, the regulator will weigh the degree to which the price limit safeguards consumers against the additional burden placed on all bill payers who would bear the cost if the cap forces providers to close their doors.
The government may intervene at any time throughout this procedure. Thus yet, it has shown little desire to do so.
