Russia affecting energy prices

Article posted

22nd Feb 2022

Read time

4-7 min read

Author

Mollie Pinnington

 

What is happening between Russia and Ukraine?

Tensions have been building between Ukraine and Russia since the beginning of the year. Although Russia has reassured many times that they have no interest in invading Ukraine, countries across Europe and America are still preparing for the worst.

As of yesterday, Russian troops have invaded two regions within Ukraine after Russian President Vladimir Putin recognized them as independent states. This has sent fears soaring of rising energy prices.

There have always been sanctions on Russia from the US and EU countries. However, these sanctions may deepen now that Russia has increased the threat level on Ukraine.

By implementing these sanctions the UK might risk cuts to the energy supply and even see a rise in prices.

 

Why Russia is so important to the energy industry

Russia plays a major part in the oil and gas industry. They are the third-largest producer of oil and the second-largest producer of natural gas.

According to experts, Russia accounts for 1 in 10 barrels of oil consumed globally and around 22 percent of the global output of natural gas.

Due to this large-scale production of energy Russia has often been referenced as an “Energy superpower”. Most of the energy in Russia is generated from fossil fuels but they are also world leaders in natural gas. These are two of the most reliable energy types now so cuts to them could be detrimental.

Although the world is trying to shift to more renewable energy sources, we cannot completely rely on them just yet. We are still dependent on sources such as fossil fuels and natural gas to make sure supply meets demand. This is why Russia is such a big contributor to the energy industry. 

 

How tensions could affect energy prices

If Russia decided to cut the Energy supplies to Europe or any other part of the world then these risks put a big dent in our already low energy supplies.

If the UK imposes sanctions on Russia this could affect the threat of them cutting off energy supplies. A lot of the UK’s oil and gas does come from places other than Russia, but the cutting of the supply would still hurt wholesale prices around the world.

The UK has already seen blows to the energy industry with many suppliers falling over the past year and household energy prices increasing the cost of living. If tensions continue to rise between Russia and Ukraine then this could cause energy prices to rise further. 

 

How is this going to affect your business?

You may be thinking what does this mean for my energy bills? If you are on a business energy contract you should be taking this time to reevaluate your energy situation. Sanctions that may be imposed on Russia from the UK and EU are likely going to affect the energy market and the wholesale energy price.

If your energy contract is coming to an end, then holding off on switching might seem like a “safer” plan for your company. However, putting off switching is going to increase how much you pay as you could be put onto a rollover contract by your supplier which will likely be at a higher rate than you are paying now. Not only this when it does come to a point when you decide to switch your energy contract then prices could be much worse off by then. 

Prices are going to keep going up and could stay up for a long period, depending on factors not just in Russia but all over the world. Therefore, before prices rise any further it would be best to make sure you switch your contract now as holding off is going to be more expensive for your business in the long run.

If you are ready to switch energy contracts today why not get in touch to see how one of our energy experts can help you.