Gas prices in the UK have almost doubled as the war between the US and Iran has escalated since the weekend.
UK wholesale prices – which reflect the costs energy suppliers pay producers of natural gas before selling it to households and businesses – rocketed 93 per cent this week alone.
The price of gas briefly fell to 151p amid the conflict in the Middle East, a level not seen since February 2023, before falling to around 148p.
The move followed a 32 percent jump on Tuesday, which topped a 50 percent rise on Monday.
Sanjay Raja, chief UK economist at Deutsche Bank, said higher rates could “raise inflation and reduce growth”.
“Any increase feeds into risk premia, shipping constraints and precautionary stockpiling in the oil and gas markets,” he added.
“In the UK, ideally, current oil price levels, if maintained, would add about 0.2 percent to headline inflation through higher gasoline prices; and a sustained 40 percent change in natural gas prices would increase this by another 0.7 percent, through higher household spending.”
Related: Magnet Wars: How the US Plans to Break China’s Grip on Rare Earths
Analysts at Stifel warned on Monday that any sustained rise in wholesale gas prices could feed into a future adjustment to Ofgem’s price cap, with prices seen to be closer to £2,500 a year from £1,641 – a rise not seen since the Russian invasion of Ukraine.
The initial rise in gas prices came after Qatar’s state-owned energy company said it had halted production of liquefied natural gas (LNG) following “military strikes” by Iran.
The hub is the world’s largest export hub for LNG and has serious implications for Europe, with Qatar providing around 12 to 14 percent of the continent’s LNG imports.
Elsewhere, oil prices extended their run of 3.2 percent to $80 a barrel on Tuesday morning.
“Rises in oil prices usually follow outbreaks of conflict, but the reality is that the rise and duration is more worrying than the immediate outlook, where many countries have accumulated reserves that may see them in the coming months.” Richard Hunter, head of Mutual Capital Markets, said.
AM by city
More great reading from Oilprice.com
