Wholesale energy prices are on the rise due to supply and demand challenges, impacting the costs your provider incurs from energy generators supplying your business with gas and electricity. The predominant factor behind this year's energy price spikes is the escalating wholesale costs.
While the effects of higher energy prices are felt globally, various unforeseen factors contribute to this widespread issue. The conflict in Ukraine is currently exacerbating existing challenges with energy prices, and several additional issues have coalesced to drive up energy rates:
Supply Shortages: Gas shortages in Europe, stemming from a prolonged cold winter between 2020 and 2021, depleted natural gas storage.
High Demand: Robust demand for liquefied natural gas (LNG) from Asia has resulted in diminished LNG shipments to Europe.
Closure of Nord Stream 1: The closure of this major pipeline transporting gas from Russia to Germany has significantly reduced the gas available to Europe, contributing to a surge in natural gas prices.
Infrastructure Issues: The postponement of the Nord Stream 2 pipeline, a $11 billion link across the Baltic Sea capable of transporting 55 billion cubic meters of gas annually from Russia to Europe, has impacted gas supply. Though the pipeline is complete, Germany halted its activation in response to the Russian invasion. Global ramifications are evident, with fire damage at Freeport LNG’s Texas plant limiting the import of liquefied natural gas to Europe. The plant aims to be back up to 85% capacity by late November.
Life After Lockdown: The easing of lockdown restrictions worldwide has led to an increase in energy demand.
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