Gas prices increase 26% after Russia closes a crucial pipeline

Photo: Getty Images via BBC
Photo: Getty Images via BBC

After Russia's announcement that it will not reopen its main gas pipeline to Europe, energy supply fears have pushed up gas prices.

The Dutch month ahead wholesale gas price, a European benchmark, increased by as much as 30% in early Monday trading.

The Nord Stream 1 pipeline was scheduled to return on Saturday following a three-day closure.

However, Russia's state-owned energy company Gazprom reported finding a leak.

Due to the Ukraine war, Europe has accused Russia of exploiting gas supplies to coerce European nations, which Moscow denies.

Wholesale prices have been quite volatile in recent weeks. When Germany revealed that its gas storage facilities were full up faster than anticipated, the prices fell dramatically.

Although the United Kingdom is not dependent on Nord Stream 1 for its gas, the Kremlin's move to restrict supply to Europe has increased the wholesale price of gas. On Monday, prices in the UK increased by as much as 35%.

The rise in the energy bill price cap for consumers in England, Wales, and Scotland is due to the total increase.

Liz Truss, a candidate for the Tory leadership, has pledged to unveil a plan to address rising energy costs if she is elected prime minister. Rishi Sunak, her opponent, has stated that he will focus additional payments aimed at the poorest.

However, businesses in the United Kingdom are not covered by a price restriction, and the British Chambers of Commerce warned last week that they would "close their doors this winter" if they were not assisted with rising costs.

Bill Farren-Price, an energy expert, told the BBC's Today show that the "crunch moment" would occur later in the year if the demand for gas exceeds what can be imported.

He stated that the new prime minister's primary priority would be addressing energy costs.

Several European governments have disclosed initiatives to assist firms and consumers in coping with rising energy prices. On Sunday, Germany launched a €65 billion (£56.2 billion) package that includes one-time payments to the most disadvantaged and tax cuts for energy-intensive businesses.

Sweden and Finland unveiled multibillion-pound packages to boost energy industries over the weekend.

War winter

Other European ministers have accused Russia of employing energy supplies as economic warfare against Ukraine's supporters.

Moscow has denied intentionally limiting exports in winter to increase prices for people and companies.

State-owned energy company Gazprom cited an oil leak in a turbine on the Nord Stream 1 pipeline as the reason for the shutdown.

The European Union and Siemens, the German company maintaining the turbine, contest this claim.

"Typically, such leaks do not impede a turbine's performance and may be plugged on-site. It is a standard operation within the scope of maintenance work "Siemens said in a statement.

Gazprom announced the shutdown on Friday, just after the G7 nations decided to freeze the price of Russian oil in support of Ukraine.

Countries adhering to the policy will only be able to purchase Russian oil and petroleum products carried by water if offered at or below the price ceiling.

However, Russia has stated that it will not sell to countries participating in the cap.

The Swedish prime minister, Magdalena Andersson, stated that Russia's actions could lead to a "war winter" and have repercussions for enterprises and the Swedish economy.

The Nord Stream 1 pipeline can transport up to 170 million cubic meters of gas daily from the Russian coast near St. Petersburg to northeastern Germany.

It is owned and operated by Nord Stream AG, of which Gazprom is the largest shareholder.

This is not the first time the pipeline has been shut down since Russia invaded Ukraine.

In July, Gazprom suspended all deliveries for ten days, citing "a maintenance break" Ten days later, it resumed, albeit at a significantly lower level.

Publish : 2022-09-05 15:57:00

Give Your Comments