Cheaper gas has little effect on heat bills

Plunging wholesale gas prices have sparked speculation of an end to Europe’s energy crisis — but consumers’ electricity and gas bills remain sky high, fuelling runaway inflation.

European benchmark Dutch TTF gas price has shed 18 percent since the start of this year as unusually warm winter weather depresses demand and encourages stockpiling.

The price has fallen by more than 82 percent since August, when it had spiked on fears over a lack of supplies from key producer Russia.

The Ukraine conflict highlighted Europe’s dependence on Russian gas, prompting a rush for alternative resources and improved efficiency measures as leaders sought to avert a costly supply crunch.

This approach, in tandem with mild winter temperatures, enabled European nations to replenish reserves.

“An unusually mild winter has helped reduce heating demand, while record liquid natural gas imports and increased renewable capacity have boosted supplies,” said Mirabaud analyst John Plassard.

Europe’s gas stocks are hovering at about 82 percent of capacity, up from 50 percent one year ago and “well above” the seasonal norm of 70 percent, he added. TTF gas sank to a 16-month low this week and stood at €60 per megawatt hour on Wednesday, although this was still more than double its prepandemic level.

In contrast, TTF gas had rocketed last March to a record €345 after Moscow launched its invasion of Ukraine.

German Chancellor Olaf Scholz, whose nation is trying to wean itself off Russian energy, said Saturday that gas prices are falling in Europe. Yet that has failed to translate into lower bills for businesses and individuals.

With Russia also slashing its gas deliveries to Europe over Ukraine tensions, Norway has become the continent’s primary supplier.

Anders Opedal, chief executive of Norwegian energy giant Equinor, told the BBC that there was “a kind of rewiring of the whole energy system in Europe, particularly after the gas from Russia was taken away”.

And he warned high electricity and gas bills were here to stay — and cited the huge cost of investment in the transition to cleaner energy.

Those sentiments were echoed by Oanda analyst Edward Moya.

“Energy bills will not be returning to pre-pandemic levels because energy companies are facing surging expenses transitioning from fossil fuels to alternative energy sources,” Moya said.