Energy Update Issue 5 Market update There has been considerable media coverage of how the war in Ukraine has pushed an already inflated wholesale energy market to historic highs. Costs were already elevated following the spike in prices in the second half of 2021 and many analysts are forecasting that the UK will be heading for an extended period of high energy bills. The reason for this is that the UK is now part of a global market for energy where Russia is a key gas supplier and when there are risks of disruption to gas flows, prices reflect a situation where demand could exceed supply. This means that even if only a very small percentage of gas used in the UK is from Russia, as some countries have few other supply options, costs will increase for everybody. European countries are making plans to reduce dependence on Russian gas but these strategies will take time to implement and therefore geopolitics will continue to be a key driver of market movement. It is also inevitable that high energy costs will have some impact on demand
as some industry sectors reduce operations. This means markets are likely to remain highly volatile for some time, as they react to changing economic conditions and any news of escalations in the ongoing conflict in Ukraine. The ESPO Energy team have been able to protect customers from these high prices by forward purchasing energy in advance. The rates ESPO gas customers are currently paying are around a third of those now available on the market, saving customers thousands of pounds. However, when the market remains high for an extended period, like other suppliers, we need to obtain some of the gas and electricity our customers require at prevailing wholesale rates. Our traders will continue to look for opportunities to secure energy when conditions are most conducive to do so and with the ability to purchase volumes flexibly, we seek to balance the risk of further increases, while being able to take advantage of lower rates should there be a fall in wholesale costs in the future.
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