Higher gas prices, including in the summer when demand is supposed to be at its lowest, are a long-term trend argued asset manager Investec.
In its latest report on oil and gas prices, Investec described historically elevated gas markets – which peaked at £8 per therm in March and have averaged 230p for the year -as a “long term trend” which could persist beyond 2025.
Investec said: “We anticipate that if Russia continues to restrict gas supply then UK gas prices are likely to remain elevated. This is underlined by our forward curve, which remains elevated beyond 2025.”
The asset manager noted that the UK gas prices began to move higher last year.
Last summer prices were 50 per cent above the 10-year average – before Russia’s invasion of Ukraine – driven upwards by rebounding demand and underperformance of renewables.
Through 2022, it highlighted that UK gas price have remained at elevated levels – averaging 230p per therm – driven by fears of supply shortages following Russia’s invasion of Ukraine and continued geopolitical uncertainty.
This is all ahead of winter, when gas demand for heating increases and EU sanctions on Russian oil
production should begin to bite.
It concluded: “This is remarkable for a summer, when gas demand for heating Is at its lowest. We anticipate that if Russia continues to restrict gas supplies, UK gas prices will remain elevated.”
Further issues beyond gas supply have developed with nuclear and hydro power underperformance in France and Norway, respectively, putting further pressure on UK and European energy resilience.
This also reflects ongoing reliance on high cost LNG imports.
Investec has hiked its full-year forecasts in 2023 to 300p per therm, up from 250p per therm.
Currently, the spot price on the UK benchmark for natural gas is 389p per therm,
Wholesale prices have been the key driven behind record hikes to the energy price cap, with multiple forecasters predicting a massive spike in energy bills this winter.
The latest alarming prediction from Auxilion calculates the cap will climb to an eye-watering £5,008 per year next April.
It is currently set at £1,971 per year – which is already a record price for energy.