In short, there is a global shortage of gas and energy supplies. There are two main reasons for this. Firstly, Europe is feeling the prolonged effects of last year’s cold winter – stored gas supplies were left much lower than normal. Secondly, we saw a spike in demand for liquefied natural gas (LNG) in Asia, after the continent also experienced a cold winter. When these two issues combined, energy prices soared, particularly across these two continents.
The UK has been particularly hard. UK households use a lot of natural gas, with 85% of homes using gas central heating. Additionally, a recent fire at a national grid site disabled a power cable supplying electricity from France. Renewable energy supply is also down due to this previous summer being the least windy since 1961.
As a result, wholesale energy prices have been rising, multiple energy suppliers have collapsed, and 1.7 million customers have been impacted. In the UK, as of the beginning of this year, there were 70 different energy suppliers. According to the BBC, industry sources are suggesting there may be as few as 10 left by the end of the year.
Putin to the rescue?
Gas prices rose by 37% in 24 hours on Wednesday, however, Russian President Vladimir Putin managed to settle the market, with prices dropping after saying Russia was prepared to step in and stabilise soaring energy prices. Putin noted that Russia is boosting gas supplies to Europe to assist with the shortage.
What is happening around the rest of Europe?
The effects of this are being felt abroad. In September, the French government pledged one-off €100 (A$158) payments to 5.8 million households struggling to pay their energy bills. Spain has placed a cap on energy prices and profits. Germany and Poland have also faced significantly higher energy costs, and are contemplating their next steps.