Blog Post

UK natural gas futures exceed the threshold of 400 pence a therm for the first time ever

Richard Simmonds • Oct 06, 2021

Energy prices across Europe surged to new record highs yesterday and there’s no sign of them going into retreat in the foreseeable future adding to concerns over already struggling energy suppliers.

New record high gas price

In the UK natural gas futures hit a new high by exceeding the threshold of 400 pence a therm for the first time.

The news will not be welcomed by energy suppliers and governments across the continent who are struggling to keep costs down and try to stay afloat.

Consumer energy bills are set to surge next year with market analysts predicting that Ofgem’s energy price cap will have to be increased massively if suppliers are to survive.

Also read: What has caused the Energy Market Crisis and what does it mean for the energy retail market?

Low gas storage levels

With winter just around the corner, concerns are also growing over gas storage levels across Europe. The worries are adding to the price hikes and the surging costs are threatening to send inflation soaring.

Industrial output across the UK and EU are starting to feel the price squeeze with some factories warning that they may have to close to slash spiralling costs.

According to some reports, gas stockpiles across Europe are at their lowest levels in more than a decade and domestic production is falling behind demand.

At an industry conference a market expert warned; “If we have a cold start to the winter and we’re withdrawing gas, we’re not going to have any gas left by the time cold winter hits.”

Also read: Wholesale gas prices hit another record high adding to energy market concerns

Issues across Europe

In Germany, power costs hit a new record high of €161.25 per megawatt-hour and prices for next month and the next quarter have already been priced at their highest ever levels.

Germany, like the UK, has low gas storage levels in place and its reliance on coal and Russian provided gas has put it into a precarious energy situation.

Meanwhile, in France, ongoing disputes between energy unions and a major French utility company has resulted in energy output from hydroelectric and nuclear being cut for a 24hour period. More cuts are likely as long as the dispute drags on.

Also read: Energy Crisis prompts France and Spain to urge EU wide rule changes

French threaten to cut UK energy supply (again) over fishing dispute

Separately, the French have reminded the UK just how little the nation can rely on their neighbours in the EU for support after the French government issued another warning that it could cut energy supplies over a fishing dispute.

The threat comes after a third of French fishing vessels applying to fish in the waters around Jersey were refused permission by the British government. The authorities said that the boats refused had not provided the correct documentation to prove that they had a right to fish there.

In response, as is the French way the nation’s EU Minister Clément Beaune declared that; “France would not stand for it. Enough already, we have an agreement negotiated by France, by Michel Barnier, and it should be applied 100%. It isn’t being. In the next few days, we will take measures at the European level or nationally to apply pressure on the United Kingdom.

‘We defend our interests. We do it nicely, and diplomatically, but when that doesn’t work we take measures. The Channel Islands, the UK, are dependent on us for their energy supply. They think they can live on their own and badmouth Europe as well. And because it doesn’t work, they indulge in one-upmanship, and in an aggressive way.”

With the Brexit agreement tying fishing rights to access to the continent’s energy supplies, this scenario was always likely to happen.

The UK Brexit minister Lord Frost claimed it was “unreasonable” to suggest the UK was acting in bad faith when it came to allocating post-Brexit fishing licences to French boats and urged Paris to “keep things in proportion”.

Also read: France’s threat to cut off electricity to Jersey proves the UK needs to rely less on the EU for energy