Why Are Energy Prices Around The World So High?

People in the US, Europe and the UK are all experiencing an energy crisis that has resulted in soaring bills and energy insecurity over the last few months.

With speculation and misunderstanding about why this is happening, it’s important to note that every region is experiencing their own problem for a slightly different reason, so let’s break those reasons down.

For those living in Europe, one of the key issues is that 45% of natural gas there is supplied by Russia. Russia is a major global exporter of natural gas, and last year the Nord Stream pipeline carrying gas to Europe saw its capacity cut to 20% due to maintenance issues.

Whether there really were maintenance issues, whether this was third-party sabotage, or whether Russia was weaponizing its natural resources due to the ongoing conflict in Ukraine, we have no definitive answer. The result, though, is indisputable; a surge in wholesale gas prices, and Europe has been experiencing an undersupply of natural gas, resulting in some of those higher prices.

For those in the USA, this is directly related to their own energy woes. USA suppliers, realizing they can command a very good price for gas in Europe, have been selling their wares there, resulting in a lack of supply back home, again driving up prices for Americans.

But what about the UK, where less than 4% of natural gas comes from Russia, and where half the gas used is created by the UK itself? That’s a slightly more complex problem, but essentially the UK has a lack of storage for natural gas, which it sources from Norway and other European countries.

This means the UK is reliant on the ‘real-time flow’ of gas as and when it’s needed. In the winter, when supply naturally increases and prices naturally rise, this hits the UK hard.

The UK also uses gas to create 40% of its energy, which is a much higher percentage of gas than other nations around Europe rely on. Add to this a lack of subsidies from the Government to make up for the disproportionate rise in energy prices, and we have the situation we see today.