State Of The Energy Market – May 2022
Fidelity Energy have released their latest monthly pricing report , breaking down the current state of the energy market.
All energy bills are driven by the price of wholesale energy coupled with third-party costs such as government, network, policy and system costs as well as electricity transmission and distribution costs.
The biggest single cost on a bill is the price of the energy. The wholesale cost of the energy makes up approximately 40% of an electricity bill and 70% of a gas bill, with the remaining being third-party costs. It is these third-party costs that can rise and be volatile.
Energy demand in the UK has been above seasonal norms. Despite the warmer weather, there is increased demand for gas in Europe as Russian gas supplies to Europe have been steadily decreasing.
The UK gas system has opened balanced this morning despite maximum exports to the continent via the IUK and BBL interconnectors. There are currently 4 LNG vessels confirmed as heading to UK terminals between 20th-23rd May, with 3 more possibly berthing at UK shores towards the end of the month, helping to keep steady prices slightly.
With the EU unable to reach an agreement on a sixth package of sanctions against Russia there is a proposition to impose an embargo on oil instead. However prices edged higher following reports that Hungary is still looking to veto this embargo as they are almost completely dependent on Russia for their oil.
What Does This Mean For My Business?
At this moment in time, we still recommend longer-term energy contracts, which can fix a price to avoid any further increases as well as provide budget certainty over the next few years. Remember to check your contract end dates! Time and time again we have seen businesses suffer paying premiums of over 200% on their bills because they are out of contract with their supplier.
If you want to read and digest the full report, please click here.