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Mondial Chart of the Week 📈 - 26 September 2021

Natural gas price, pence per therm

26 September 2021


What does the chart show?

The chart shows the natural gas price since January 2000. The price has risen sharply in 2021, soaring to 189.65p per therm at the beginning of this week, threatening to push up winter fuel bills and exacerbate a near-term spike in inflation. A long, cold winter in various parts of the world meant gas storage levels had been dramatically depleted and are at historic lows.

High demand from Asia, lower-than-expected gas pipeline flows from Russia to Europe, and a lack of wind for wind turbines (meaning other sources of electricity have been required) have all added to the problem. Since the start of 2021, the price has increased by over 230%. An additional headwind has been the fact that the UK and Europe import a large amount of its gas and imported energy is exposed to global price swings, making prices more susceptible to volatility.

Why is this important?

The gas crisis has escalated across UK industries including threatening food supplies. The surge in natural gas prices forced the closure of two fertiliser plants (which are used to produce carbon dioxide) and could disrupt the supply of products from meat to steel. The UK government struck a deal to provide financial support for just a few weeks to restart the plant in a bid to prevent a food supply shortage.

n addition to the wave of fertiliser plant disruptions, many electricity providers have either gone bust already or are on the verge of bankruptcy. Whilst end consumers are somewhat protected by the energy price cap (electricity providers cannot pass on all of the higher wholesale prices they pay), there have been fears that recent events might exacerbate recent price inflation which could stall the economic recovery underway.

Source: Bloomberg Finance L.P., Momentum Global Investment Management

Research Date: September 2021

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