Gas prices in Europe are rising sharply - Who will be the first to pay more?
Gas and electricity bills could rise in Europe this winter if wholesale prices remain high enough to reach consumers. The European benchmark price for wholesale natural gas, the Dutch TTF for the first month, traded above 66 euros per megawatt-hour (MWh) on Tuesday. That compares with around 29 euros/MWh at the start of the year.
The increase has been driven by growing investor concerns that the Strait of Hormuz could remain closed through the winter. This comes at a time when gas storage levels in the EU remain historically low ahead of the heating season. EU gas storage was 62.99% full at the end of the gas supply day on August 24, according to data from Gas Infrastructure Europe.
Oxford Economics said in a report that the EU could operate with lower storage levels, although that would mean relying on more winter LNG imports. And that could leave the EU more exposed to competition with Asian buyers for available cargoes.
Competition has already intensified due to the closure of the Strait of Hormuz, cutting off a route that normally transports almost a fifth of global LNG trade.
According to the report, the extent to which energy bills will increase will depend on how long the price increases last. Across the EU, households on variable gas tariffs will be among the first to feel the effects of higher wholesale prices.
According to Oxford Economics, it takes about six months on average for changes in wholesale prices to be fully reflected in consumer prices. However, the timing varies greatly between countries.
Oxford Economics considers Italy the country most exposed to a gas price shock among major European economies, due to “the interplay of a relatively rapid transition and a significantly above-average dependence on gas.” However, the country currently has one of the highest levels of gas storage, according to data from Gas Infrastructure Europe.
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