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Why are gas prices rising?

gas-refinery

In the past weeks, the price of gas has shockingly risen by 250% compared to January leading to several energy suppliers closing and has caused mass concern and uncertainty in the domestic and business markets. There are countless opinions out there with conflicting and challenging thoughts and perspectives.

Prime Minister Boris Johnson considered the gas crisis a short term issue and went on to suggest it was right for the UK to be moving away from reliance on hydrocarbons and it into clean green energy that works. This has been challenged by Energy regulator Ofgem who state it’s extremely difficult to predict the future of gas prices and that there are many, many factors outside of UK’s control. The crisis however has brought together various large businesses (including BT, Nestle, Co-Op, Mitie – who have written a letter to the government pushing to phase out gas power and replace it with greener solutions, addressing to the Business Secretary Kwasi Kwarteng, it says “we believe the time is right for the UK to signal an end to the use of unabated fossil fuels in the power sector…“.

So what has caused the gas price increase?

The prices of wholesale gas have increased which has had a knock-on impact on the price for the end-users. According to the government, pricing has been influenced by several factors including:

  • “as the world comes out of COVID-19 lockdowns and economies reopen, we are seeing an uptick in global gas demand this year.”
  • “combined with a cold winter (which has an impact on gas demand as gas is often used for heating homes) this has led to a much tighter gas market with less spare capacity”
  • “in particular, high demand in Asia for Liquified Natural Gas (LNG), natural gas transported globally by ship, means less¬†LNG than expected has reached Europe”
  • “some essential maintenance projects rescheduled from 2020 due to coronavirus coincided with necessary scheduled projects in 2021, while weather events in the US have adversely affected their LNG exports to Europe”

There are separate concerns that the price of electric is to rise due to the National Grid site fire on the 15th September which caused a temporarily shut off between the Interconnection France – Angleterre and the Sellindge, Kent site.

What does this all mean for businesses?

The impact of gas price rises are not solely affecting companies that supply energy but rather many other industries in particular food businesses and supermarkets that use gas to deliver and store produce. Due to Covid, many SME businesses turned to be run from home and home working moreover has increased massively so gas and electric usage patterns have changed.

There is a price cap however the price increase will still affect you and your business. If you are towards the end of your contract soon why not speak to the MB Energy team to lock in rates and avoid the price hike.

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