Global uncertainty increases energy costs

Current market conditions

A US Federal Court ruling blocking Trumps tariffs is the most recent, but not the last, twist in the tale. On every turn, markets increase or reduce expected global demand with prices moving in step.

Another failed Trump initiative, to end the Russian invasion of Ukraine, has also pushed prices higher. The expected end of sanctions and the return of oil and gas to the markets seems further away given the increasing aggression shown by the Putin regime.

Cost outlook

In addition to these specific inflationary factors, market movements reflect the changing tension between global supply and demand. At this point supply is set to remain strong due to:

• Asian summer gas for cooling demand
• Egypt is expected to become a major LNG buyer as it seeks to avoid rolling blackouts this summer
• Ongoing refilling of European gas reserves. Europe’s reserves are currently at 47%, while the UK is unchanged at 26%
• Norwegian gas field maintenance, reducing output from Europe’s largest supplier

There are also favourable factors as warmer weather and strong renewable generation have reduced UK gas for heat and power demand. On Sunday 24 May, UK electricity prices fell to a negative and as low as -3.5ppkW due to low demand and strong wind generation.

Additional LNG is expected this year, mainly from the US and Canada, however, this is not yet in production.

Current Energy Costs:

The increase in commodity costs in the last month is only now feeding through into contract rates. With many pubs, particularly larger multiple operators contracting now, rather than wait until the last few months of existing contracts.

Wider market concerns

Service levels of many suppliers continue to pose major obstacles for many pubs, unable to spend hours on the phone trying to resolve problems.

Those taking on a new pub, may face greater challenges trying to complete the change of tenancy as a new Change of Occupier code from the Retail Energy Code Company, establishes a supplier’s right to ask for documents, which may prove very difficult to obtain, such as a solicitor’s letter confirming a change of tenancy – an agreement which generally doesn’t involve a legal agent.

Disconnections continue to pose a major issue for pubs. Suppliers who are quickest to disconnect are often the slowest to reconnect, demanding up to £1,200 to remotely reconnect a meter, at the flick of a switch.

Several suppliers offering competitive prices offer poor customer service and are the quickest to disconnect. Failings which are not adequately compensated for by a marginally better price than better suppliers.

What does this mean for pubs

As we progress through summer, the market will become increasingly volatile as to future events, crucially, the availability of gas over the coming winter. Any negative factors have a much greater capacity to increase prices than good news can lower them.

With many suppliers offering poor levels of service and potential additional in-contract costs, it is important to get a market review of available options and an explanation of the key T&Cs from different suppliers.

Many pubs are opting to renew earlier than they may have done previously to avoid potential price rises, with the added benefit for those coming out of 3-year contracts of savings of 40% plus against current rates.

How Nationwide Energy can help

Making informed decisions in a challenging market requires comprehensive advice. Nationwide Energy’s field and office teams offer detailed consultations to help businesses:

• Consider offers from different suppliers and different contract lengths
• Understand the merits and risks of various supply options
• Evaluate contract terms to avoid hidden costs
• Access the latest market insights for informed decision-making

Providing customers with the time and information they need to choose the best energy solutions for their business.

Contact us today:

📞 Tel: 02476 328995 📧 Email: info@nationwide-energy.co.uk 🌐 Website: Nationwide Energy Free Guides