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Why are gas bills falling and inflation not calming down?

Gas costs have been falling in Europe for months, shifting away from their report highs firstly of the Ukraine struggle, however the decline should not be mirrored in bills for months. (©AFP/Archives/Alain Jocard)

Gas costs have been falling in Europe for monthsUkraine is shifting away from their report originally of the struggle, however this decline ought to not be mirrored in bills or inflation for months.

The struggle in Ukraine pushed the TTF futures contract, the European gas benchmark in monetary markets, to a historic excessive of 345 euros per megawatt hour in March, days after the Russian invasion of Ukraine started.

British gas additionally reached its report worth of 800 pence per therm (unit of warmth).

Freefall course

After falling again, they reached their report once more in August following the announcement of a Russian provide freeze. via Nord Stream 1 gas pipeline.

Since then, the value of TTF Over 66% and British Gas misplaced round 57%.

Electricity costs skilled the identical loopy surge on the finish of August, with contracts for supply in Germany as early as 2023, which serves as a benchmark in Europe, at greater than 1000 euros per MWh, which is extraordinary.

Unlike gas, electrical energy costs have risen by round 175% because the begin of the yr and vitality bills have soared: within the UK, for instance, they’ve doubled in a yr.

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In this nation, vitality tariffs for households are regulated by the sectoral authority Ofgem and mirror worth fluctuations available in the market, however are delayed, as they are re-evaluated each three to 6 months.

Moreover, even when the bills are increased, they are mitigated by substantial help from governments in a number of European nations, additionally serving to to decouple vitality costs and costs available in the market.

Currently the invoice is capped at a median of £2,500 per yr within the UK, for instance, from October 1 to April.

This represents an 80% improve over the value in impact this summer season, however with out authorities help, this regulated worth would have reached round 3,500 kilos, in line with analysts, and presumably extra in January.

Energy help measures have been put in place in different European nations, notably France, the place they concern households, but in addition companies and communities, and even Germany, which introduced a large 200 billion euro plan on the finish of September.

So because of this the intense costs that we now have noticed in these 3 to six months (available in the market) have not but been totally crossed. [sur les prix de l’électricité pour les consommateurs].

Georgy SlavovMarex Analyst

In addition, present regulated tariffs are solely restricted to April throughout the Channel and they need to be elevated at the very least till subsequent summer season, warned Paul Dales, economist at Capital Economics.

Price assured

For vitality corporations that purchase electrical energy available in the market, they hardly ever pay it on the spot worth, as they clean their prices via ahead contracts, which assure them a hard and fast worth for a selected time period – A kind of worth insurance coverage.

however ConverselyWhen the value drops, it’s not potential to make the most of the contracts till it’s time to purchase them.

Airlines additionally purchase the gasoline they want primarily based on a ahead contract, explains unbiased analyst Howard Wheeldon.

Prices for customers will stay excessive for a while to return.

Howard WheeldonIndependent analyst

According to Paul Dales, inflation within the United Kingdom is round 10%, and ought to not fall a lot beneath this threshold earlier than July.

Gas or electrical energy costs can rise sharply within the winter if temperatures up to now are gentle, plunge, or if new geopolitical occasions happen that restrict provide.

Not to say the potential restart of China’s economic system and therefore demand for liquefied pure gas, if the nation ends its restrictive zero covid coverage that has weakened exercise.

Source: © 2022 AFP

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