State of the Energy Market – 12th July 2022

  • Daily Updates

Tuesday (12th July) has been another volatile day with quite extreme increases at the market opening gradually being eaten up during the day, leaving us with a prompt increase of 8% currently for August 22 gas at the time of writing.

In addition to the Nord Stream 1 gas pipeline now entering day two of maintenance, news reached the market that a handful of Norwegian gas fields were temporarily closed, which was not part of the summer maintenance program. This further reduced the gas reaching the UK and Europe and caused prompt prices to reach within day highs of 25% at one stage, before dropping to an 8% increase in the afternoon. Winter 22 gas was also impacted by the news and reached a peak increase
of 10% just before lunchtime before settling to a 5% increase in the afternoon.

Gas

August 22 wholesale gas prices gas prices dropped by 13%  to close at £222.24 per therm.

Power

August 22 wholesale power prices increased by 1.2% to close at £251.37 per MWh.

In other energy related news:

A review by the Competition and Markets Authority (CMA) has found that fuel costs have been driven up by increases in price that oil refiners charge to process crude oil. Kwasi Kwarteng, the Business and Energy secretary, requested the review and the results suggest that, whilst crude prices have been increasing, there has been a ‘growing gap’ between the crude price and the wholesale price of petrol and diesel. The refinery spread has increased from 10p per litre to 35p per litre. Over the same period, the spread between the wholesale price and the price charged to motorists has remained at 10p per litre. The CMA also found that the cut of 5p from fuel duty announced at the last budget had been applied by the largest retailers immediately, whilst smaller retailers applied the discount more gradually. The review also found distinct differences in fuel prices between rural and urban areas. The CMA will now be launching a more detailed review to understand if there are legitimate reasons for the findings in the report and whether any action needs to be taken against companies found to be acting inappropriately. 

National Grid have created a report called ‘The Pathway to 2030 including the Holistic Network Design’. The report focuses on key energy industry infrastructure changes that will be required to enable the UK to cope with the dramatic increase in offshore capacity that will be built to help us reach our 2030 decarbonisation targets. If we only focus on building extra offshore windfarms without updating the means of transporting the additional energy, the current system will not be able to cope with the extra amounts of generated energy. This report focuses on the importance of ensuring all future infrastructure upgrades are carried out in a cohesive way. These next few years will see the greatest amount of investment into the UK network for over 40 years and if we take a cohesive approach, as opposed to joining windfarms to the grid individually, we can achieve savings of over £5 billion, according to National Grid. 

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