The arrival of cold winter weather has sent wholesale gas prices sharply higher as Brits reach for the thermostat into some of the longest nights of the year.
One industry measure has trebled in a month, while prices traded on London’s Intercontinental Exchange are up by almost a fifth since the start of November.
Households are protected from the increase by the government’s Energy Price Guarantee, which caps the annual cost of the average amount of gas used by UK households at £2,500 this year. It will rise to £4,279 from January. Rising prices mean the government’s intervention will cost taxpayers more.
Numbers out today from the Office for National Statistics show that the System Average Price of Gas spiked up to its highest since September, more than trebling in a month.
The SAP is an industry measure which tracks the on-the-day commodity market and is used by the National Grid as it balances out supply and demand to keep gas distribution running smoothly. It helps understand the general trend in prices, but can be subject to big day-to-day swings reflecting technical aspects of deliveries.
As the chart also shows, a mild autumn helped keep a lid on costs beforehand and prices are significantly below peaks hit in August at the height of fears over potential supply fears after Russia’s invasion of Ukraine.
Nonetheless, it’s clear that even as the market calmed down since the summer, prices are established at significantly higher levels than in previous years.
Wholesale natural gas futures traded on the ICE exchange rose 1.4% to 379.4p per therm on Thursday, a unit of energy equivalent to 100 cubic feet of gas, which generally should be enough to run a typical central heating system for around an hour. That took the price up by almost 20% from the start of November, although kept it around 60% below its peak for 2023
Russ Mould, investment director at stockbroker AJ Bell, said: “In reality the respite provided by a mild autumn was set up to be short-lived. Relatively limited European storage capacity meant there was always a risk of the continent moving from feast to famine when it comes to gas supplies.”
