As a business cost consultancy, we feel it important to provide our customers and contacts with a market update on the current state of affairs within the UK energy Market. Firstly our thoughts go out to anyone affected by the current Russian invasion of Ukraine. It’s an incredibly worrying and devastating time and all at Team FFB pray for a quick and peaceful resolution. 

We have recently been in contact with your company regarding your energy supply as we remain committed to serving UK businesses for their energy needs through these very challenging times. 

We wanted to apologise that delivering our standard services is being delayed due to UK energy suppliers reacting to world events. Many, if not all, energy suppliers have currently stopped providing prices or contracts for renewal or acquisition business. As a result, many customers who received an energy supply contract offer via FFB in previous weeks will find that suppliers are no longer honouring the validity of those contracts.

A summary of what is happening & why:

The escalating conflict caused by Russia in Ukraine is having a significant impact on gas prices globally. 

It is true that the UK only receives c4% of its gas from Russia, however most of the gas we do purchase is bought on international wholesale trading markets. If other countries, such as Germany or Italy, cannot purchase or choose not to purchase, their gas from Russia then they will look to purchase it elsewhere. This will increase demand in other gas markets, the markets where the UK currently buy their energy. As a result, our cost to purchase gas will increase.

As its stands today, the flow of gas from Russia into Europe is steady and, in some cases, is flowing at its maximum. We are seeing in day pence per therm price rises of as much as 65%.  These rises are due to suppliers feeling nervous about the geo-political situation and reacting to current news stories…

For example, when Germany said they had cancelled the new Nord Stream 2 gas pipeline, suppliers increased the amount of gas they were buying which pushed prices up. 

At the time of writing, 3rd March 2022, the front-month UK gas price closed at its second-highest ever Wednesday at 422.75 pence/therm as concerns continue over the Russian invasion of Ukraine.

Gas flows of Russian gas to Western Europe continue as normal, including flows through the Ukrainian gas network to Slovakia for onward transport elsewhere in Europe. However, EU countries are not purchasing it as normal due to refusal to trade with Russia.

What we have is a gas price issue, not a gas supply issue.

The UK has now introduced a ban on Russian ships in its ports, and union workers say they are unwilling to unload them. This will likely block most Russian Liquid Natural Gas cargoes from being delivered into the UK.

The good news is that gas storage levels are improving across Europe and have fallen back into the ‘normal’ levels for the first time in many months. This is being driven by stronger winds (meaning less gas is required to generate electricity) and above seasonal temperatures.

In summary we expect these challenges to be short term as markets will begin to accept and establish a ‘new normal’ when it comes to gas pricing.

We are actively working with our trusted network of suppliers to get back online as quickly as possible. As soon as our panel confirm they are back online, then we will be in touch.

UK businesses must urgently review their energy costs and reduction strategies. Being a fully transparent consultancy, dedicated to putting our customers first, we will be the first to assist in these aims and will remain committed to supporting your business.

Thank you for your patience during this distressing and unprecedented time. Stay safe. 

Chris Charlton, CEO at Fusion for Business