Finance

Gas price shoots up again due to tensions Ukraine border

Today, a megawatt hour of gas costs about 119 euros on the Dutch wholesale market, where energy suppliers buy their gas. That is about the same as during the peak in October.

Then gas prices rose to record highs due to a combination of factors. The most important are that gas reserves in Europe this year are historically small and the demand for gas is very high because the economy in many countries is running again. In a severe winter, there is therefore a risk of a shortage, which pushes the price up.

The main panic seemed to have subsided and prices fell significantly from mid-October. But now it’s all hands on deck again.

Fear of conflict

The Russian troop build-up on the border of Ukraine is causing a lot of nervousness. If a real conflict breaks out, this can also have major consequences for the gas supply in Europe. An important gas pipeline from Russia to the EU runs right through Ukraine. If those deliveries come to a standstill, the chance of a shortage in Europe is even greater.

In addition, Germany recently threatened to use the major gas pipeline Nord Stream 2, which is not yet in operation, to punish Russia if it invades Ukraine. In any case, traders have been concerned for some time that the pipeline through the Baltic Sea will no longer be put into operation this winter, due to the lack of a permit.

Rising gas prices this year will have major consequences for companies and households. In the Netherlands, several small energy suppliers have already gone bankrupt because they simply could no longer afford the purchase of gas.

Households the bobbin

For most households, the energy bill will also rise sharply in the coming period. The energy suppliers pass on the higher purchase prices to their customers. Anyone with a variable contract, whereby the rates are adjusted at least once a year, and everyone with a contract that has to be renewed, will therefore pay considerably more.

The cabinet therefore decided earlier to partially compensate all households for the higher energy bill.

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