Oil, gas, electricity … why energy prices are soaring

Bad news for consumers. Energy prices – gas, electricity and fuels have significantly increased in recent months in France as in the rest of the world, mainly due to the economic recovery after the crisis linked to Covid-19. Franceinfo details the current situation, which explains this boom and the expected evolution of prices.

The gas

What is the situation ? Regulated gas prices (updated monthly) have recently experienced a series of sharp increases. They thus increased by 10% in July, 5% in August and 8.7% in September. Since the start of 2019, the Energy Regulatory Commission (CRE) has recorded an increase of 15.8%. On September 15, prices also reached 79.31 euros per megawatt hour, an all-time high on the benchmark European market, after having soared by nearly 30% since the start of the week.

Why this increase? “This unprecedented increase is observed in all European and Asian countries. It is explained by the global economic recovery observed for several months”, underlines CRE in a press release. When activity slowed down due to the Covid-19 pandemic, demand for gas plummeted and some producers therefore put production on hold. Gold, “closing or relaunching gas plants takes time”, explains Julien Teddé, CEO of the broker Opéra Energie, interviewed by Numérama. While waiting for production to restart, demand is higher than supply, which drives up prices.

THEhe sharp increase in gas prices on the world market is also due to “an exceptional context”, still according to the Energy Regulatory Commission. Among these technical factors: a tight liquefied natural gas (LNG) market, with limited supply in Europe, European storage levels at the lowest for years and the moderation of Russian exports due to the gas pipeline fire this summer. Yamal-Europe, one of the two Russian gas distribution channels to the EU. In order to ensure the commissioning of the controversial gas pipeline Nord Stream 2, which has yet to be approved by the German regulator, the Russia is also careful not to use its capacity for additional deliveries via Ukraine, thus contributing to the rise in prices.

How will the prices evolve? According to Kremlin, the commissioning of the Nord Stream 2 gas pipeline should enable it to supply more gas. “When you look at the market forecasts for 2022, 2023 and 2024, the further you go, the more prices fall”, assures Julien Teddé, in The echoes. But this market correction is not for now. In the immediate, “We expect gas prices in Europe and the UK to remain high at current levels throughout the winter”, argue the experts of the Wood Mackenzie cabinet, quoted by AFP.

Electricity

What is the situation ? Regulated tariffs for the sale of electricity are revised twice a year: they increased by 1.6% in February, then by 0.48% in August. But prices are currently soaring on the wholesale markets (where electricity is negotiated before being delivered to end customers), raising fears of a very sharp increase in regulated prices next February. Enough to sound the alert to the association UFC-Que Choisir. In addition, in mid-September, the “spot” prices (electricity prices for delivery the next day) for France on the two main European stock exchanges reached a record at over 196 euros per megawatt hour, according to RTE. , the operator of the electricity transmission network.

Why this increase? Even though France mainly produces its electricity from its nuclear power plants, prices on the electricity market also follow those of gas. Why ? In Europe, the The price per megawatt hour is established by taking into account the cost of producing electricity by the last thermal power station called up in the event of a peak in activity. The European electricity networks being coupled to each other, for France, the latter plant is located in Germany … and operates on gas. As gas is more expensive, the price charged to generate electricity is also higher.

Gas plants have also been put to greater use lately, while the production of wind turbines is struggling due to the lack of wind this summer. Finally, the price of gas is also influenced by the rise in the prices of CO2 emission allowances, which must be purchased by European energy and industrial companies that consume fossil fuels, such as gas or coal. , to be able to produce. The greater the European Union’s climate commitments, the more CO2 emissions have to be reduced, the more expensive a tonne of carbon is … and the more the price of the energy produced rises.

How will the prices evolve? In France, the association UFC-Que Choisir estimates that regulated gas prices could jump 10% at the start of 2022, i.e. “an average increase of 150 euros on the annual electricity bill of a household using it for heating”. In order to anticipate this price increase, the government announced in mid-september the introduction of exceptional aid of 100 euros for nearly 6 million low-income households. This will be paid in December. An insufficient gesture for the UFC-Que Choisir, which asks the government to lower certain taxes increasing the bill and the “raising of the ARENH ceiling”, a mechanism that allows alternative suppliers to purchase nuclear electricity at a regulated price. The latter is capped at a volume of 100 terawatt-hours, but the government can raise this maximum to 150 TWh.

Oil

What is the situation ? Diesel was worth 1.4417 euros per liter on average in mid-September, according to figures from the Ministry of Ecological Transition. The unleaded 95 sold for its part 1.5589 euros. The two best-selling fuels in France have thus grown by 13% and 15% respectively since the start of 2021. But they remain far from their records of recent years. Diesel had thus reached 1.5331 euros in October 2018, just before the “yellow vests” crisis.

The barrel of Brent from the North Sea is currently moving between 70 and 75 dollars, an important development for this benchmark crude which had fallen below the threshold of 20 dollars in April 2020 in the midst of the Covid-19 crisis. “Despite this increase, the price of Brent in 2021 remains low compared to the average of more than 90 dollars a barrel observed between 2007 and 2014”, however puts the IFP Energies nouvelles Institute into perspective.

Why this increase? Fuel prices mostly follow the rise in world crude prices, which have been rising for months as the global economic recovery drives demand. Producing countries, which have long restricted their production in order to support prices, have also been slow to put barrels back on the market. Moreover, in the United States, the production is still affected by the passage of Hurricane Ida in the Gulf of Mexico.

How will the prices evolve? “These prices should stay that way for the next two or three months. They should not increase so much. (…) Towards the fall, we may see a small drop with the dollar which could fall”, anticipated in mid-June the economist Philippe Chalmin, specialist in raw materials, in Le Figaro. In the longer term, theThe prices of black gold could fall if the economic sanctions imposed by the United States on Iran, including the oil embargo has been in effect since 2018.

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