Gas prices reach two-year high in run up to anniversary of Ukraine invasion

“Gas prices will always be volatile as they are controlled by international markets and unfortunately, we are not out of the current crisis yet. With consumers set to see their bills go up again in April, the UK’s dependence on gas continues to drive up the cost of living.

“This has real consequences with NHS data revealing that 26,000 babies were admitted to hospital last year with lung conditions probably linked to exposure to damp and mould [4]. The worst homes are in the private rented sector, but landlord standards for warm homes have been delayed for years [5] and Government investment in insulating homes has gone down over the past decade.

“Building out more renewables to replace gas for electricity generation, insulating homes and transitioning away from gas boilers is how to shield households from this volatility; more drilling in the North Sea won’t lower prices or help with energy security as the gas is sold on international markets to the highest bidder.”

It has been reported that both UK and EU gas storage levels are lower than in previous years [6] and this may be impacting the gas price as colder winter weather continues and there is competition for shipments of gas. Geopolitical tensions, including the war in Ukraine and a Russian supply pipeline there being cut off at the start of the year, conflicts in the Middle East, and uncertainty with the new Trump administration’s energy policy in the US are likely contributing to higher prices.

Renewables enter fixed cost contracts via the Contracts for Difference scheme, where they pay back consumers at times of high gas prices – with £18 per consumer being paid back during the recent crisis [7] - but receive small payments when gas prices are low. This means renewables reduce volatility in electricity bills by acting as a price stabilisation mechanism as well as reducing the amount of time gas dictates the price of electricity, which in the UK is 97% of the time, the highest proportion in Europe [8].

Last year, the Energy Crisis Commission found that the UK remains “dangerously unprepared” [9] for another energy crisis because of its over-reliance on gas and the International Monetary Fund found that the UK was the “worst hit” in Western Europe by the crisis [10] because of its dependency on gas for heating and electricity generation.

The Government has committed to reaching clean power by 2030, which means phasing out the use of gas for electricity generation while keeping a ‘strategic reserve’ of gas plants [11] for back-up, but a policy gap remains around transitioning home heating away from the fuel as well as for the mass insulation of UK homes.

The North Sea is a mature basin in decline. Industry projections show that with new licenses, gas production is predicted to drop by 95% by 2050 and without new licenses it is predicted to drop by 97% [12], so there is little difference in production regardless of the Government’s position on new licensing.