European Gas Costs Reach Four-Year High Before Winter

Household energy bills in Britain are set to rise by 16 percent in January, reaching an estimated 2,000 pounds for a typical annual dual fuel contract. This increase follows a sharp jump in wholesale gas prices across the continent this week.

Wholesale gas prices in Europe reached 97 euros, or 81 pounds, per megawatt-hour on Monday. This level has not been seen since 2022, when costs surged following Russia's full-scale invasion of Ukraine. Traders increased prices as temperatures dropped and demand for heating rose.

In the United Kingdom, the month-ahead gas contract rose by 4 percent to 240 pence per therm. This represents the highest price recorded since December 2022. The surge coincides with growing concerns over potential supply disruptions in the Middle East.

Reports indicate that the United States and Israel have drawn up plans for renewed strikes against Iran after the US midterm elections. These developments pushed oil prices to 117 dollars per barrel on Friday. The Brent crude benchmark fell by 2 percent on Monday but remains above 114 dollars.

European gas storage levels stand at approximately 75 percent, the lowest figure in more than a decade. The seasonal average is closer to 80 percent. Storage has dropped due to reduced exports from Qatar and higher summer consumption for cooling and refrigeration.

The UK's energy regulators expect the country to face some of the highest energy costs in Europe this winter. Britain relies heavily on imported gas after decades of North Sea production. The country has among the smallest gas storage capacities on the continent.

Figures from the Office for National Statistics show the UK paid a record 4 billion pounds on power imports in the year ending in August. Half of that amount was spent on electricity imported from France. The country also made near-record payments to fire up gas plants while wind and solar farms were paid to switch off due to grid bottlenecks.