By Basant El-Faramawy
Europe’s benchmark natural gas price briefly reached €100 per megawatt hour on Wednesday, the highest level since Russia’s full-scale invasion of Ukraine in 2022. The surge comes as a US-led war on Iran and the effective closure of the Strait of Hormuz tighten global supplies, leaving forecasters warning of at least another year of elevated prices even if the conflict ends.
Wholesale Gas Prices Surge
High wholesale prices are feeding through to consumer and industrial bills because gas-fired plants typically set electricity prices during peak demand, a mechanism known as the merit order stack. This means even countries with high renewable generation face rising energy costs.
Impact on UK Energy Bills
In the UK, retail contracts lag wholesale markets, so the full impact will hit in 2027. A new report from EDG forecasts Ofgem’s price cap could rise from £1,723 a year to a record £2,192 in January, with the unit price for gas reaching 11.13p/kWh, surpassing the previous peak of 10.33p/kWh set in early 2023.
Jackdaw Drilling Approval
The UK government recently approved drilling at the Jackdaw gas field in the North Sea. Prime Minister Andy Burnham said the move would “protect hundreds of jobs and help keep millions of homes warm” while maintaining renewable energy pledges.
Campaigners Warn on Price Impact
Environmental campaigners and the energy transition group Uplift argue the new field will have little effect on prices because the gas will be sold at international market rates, which are driven by supply disruptions such as the Middle East crisis. They warn bills could still surge to nearly £2,200 a year on average from January.
