Russia’s invasion of Ukraine and the resulting international backlash have plummeted energy markets into complete chaos.
While Russian imports account for 8% of total UK oil demand, the ongoing war between Ukraine and Russia is causing severe supply disruption within the energy industry which is why gas and oil prices are at an incredible surge. Petrol and diesel prices in the UK have risen to record highs for nine consecutive days, according to the RAC.
The war has had extreme consequences for global energy markets too. European natural gas broke price records and oil futures grew to the widest range in three decades. The average prices of petrol and diesel in the UK hit 161.1p and 170.1p per litre in the middle of March – up respectively by 8p and 13p in a week.
Cost of living
With the cost of living rising expeditiously, the UK government is feeling the pressure from citizens and businesses amid inflation. Business secretary Kwasi Kwarteng has said ‘We will work closely with international partners including the USA, Netherlands and the Gulf to ensure alternative supplies of fuel and oil products’. Even before Russia’s invasion of Ukraine, food prices and energy bills have risen as inflation has rocketed to 30-year highs, with more pain for households set to come in April when the energy price cap is raised.
The Prime Minister has also confirmed that the government has set out an energy strategy to explain the UK’s long-term plans for greater energy security, including both renewable and nuclear power. The UK government want to move away from depending on Russia for oil and focus on building a stronger more resilient British energy system.
Despite the war having no direct correlation with the UK, we are on the receiving end of the consequences, hence the energy market mayhem. The Russian invasion of Ukraine and the EU’s dependence on Russian natural gas show that diversification of energy supplies is crucial to establishing energy security.
Energy in the UK
Over the past 18 months, the UK was already facing increased energy costs as a result of global supply challenges. But now after Vladimir Putin’s order, there are warnings the price cap for households might have to rise again to £3,000 when it is next due to be reviewed for October.
Gas prices have already risen in response to the war in Ukraine and are now more than 20 times higher than they were two years ago. Russia is the world’s second-biggest producer and largest exporter of natural gas. If they were to turn off gas pipelines or there are new energy sanctions from the West, this has the potential to push energy prices up further.
Here at Control Energy Costs, we are here to discuss any concerns you may have about energy prices or usage, so feel free to get in touch if you need any advice.