Gas prices on Wednesday morning reached 463 pence a therm – fractionally lower than record levels set in December, but still more than four times what they were a year ago.
The spike comes after UK business secretary Kwasi Kwarteng warned the UK was “vulnerable” to rising international energy prices — stoked by the conflict in Ukraine — despite its limited imports of Russian gas.
The jump came as the price of a barrel of oil soared again on Wednesday as the conflict in Ukraine raged on.
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A barrel of Brent Crude hit $111.36 – a new seven-year high – as hard-hitting sanctions on the Russian economy took hold.
Sanctions have so far excluded energy shipments of gas and oil from Russia – a country that is the world’s largest gas and second-largest oil exporter.
With large parts of Europe reliant on Russian gas, sanctions have avoided being placed on payments for energy and shipments can still flow through the continent.
But there are concerns in the market that stricter sanctions could start to impact upon the energy market too and with Russia’s financial system heavily restricted, and traders are reluctant to engage.
The UK Government banned any Russian vessel from docking in the UK, including those carrying liquified natural gas used to generate power stations.
And the International Energy Agency said global energy security was now under threat, as it released more oil into the market in an attempt to calm prices.
US president Joe Biden is also under pressure to halt imports of Russian oil, although no decision has been made.
Fawad Razaqzada, a market analyst at ThinkMarkets, explained: “Western sanctions on Russia have so far excluded energy shipments, but traders have pushed up oil and coal prices sharply higher anyway, with gas prices also remaining supported.
“The crude oil market was already tight, even before the invasion of Ukraine by Russia.
“But now there are concerns that because of the ongoing situation, foreign refiners are going to be very reluctant to buy crude oil from Russia, with some banks also refusing to finance shipments of Russian commodities.
“In effect, this is the same as an actual drop in Russian exports of crude oil. Moscow must find ways to continue selling its oil, otherwise there is the risk of an even bigger oil-price shock.
“The unthinkable would be if fresh measures are introduced that would directly target oil and gas exports from Russia, or if the latter retaliates by turning off supplies of these commodities to its western neighbors in Europe.
“An energy-dependent Europe will want to avoid this situation, nearly at all costs. But traders are not taking any chances as fighting in Ukraine intensifies, while international payments to and from Russia become increasingly very difficult with the West’s decision to exclude several Russian banks from the Swift global financial messaging system.”
Talks with Iran about its nuclear ambitions remain ongoing and there are some hopes that the country could re-enter the oil market, which would stabilize prices.
Ryanair boss Michael O’Leary said the West must work on getting oil prices down.
Speaking to Sky News, he said: “We would still believe, hopefully, that the Ukrainian situation will be resolved in favor of Ukraine in the near to short term, but there’s no doubt that if oil prices remain high, around 100 dollars a barrel , we are going to see a dramatic increase in supply.
“The Iranians are talking to the Americans about resolving the nuclear discussions… They’re already loading up tankers to export oil.
“The most important thing that we in the West can do is drive up oil production, because what hits Russia hardest is low oil prices and low gas prices.”