With temperatures dropping this week and Belgian households cranking up the heating, demand for gas spiked. At the same time, tensions have risen between Russia and Ukraine and the escalating conflict translated into a rise in prices.
Now lasting for over 1,000 days, the war in Ukraine took on a new dimension as US President Joe Biden gave his approval for Ukraine to fire long-range US missiles inside Russian territory. But Ukraine's use of these warheads triggered a strong reaction from Russia, which has hit the eastern city of Dnipro with medium-range hypersonic ballistic missiles.
NATO leaders and President Zelenskyy will meet in Brussels on Tuesday, but any peaceful truce seems inconceivable at present.
In this context, the reference Dutch gas market saw prices per megawatt-hour (MWh) rise to the highest level since October 2023, trading at €48.30 at the end of Thursday and moving towards €50/MWh on Friday. This means that gas prices today are 20% higher than at the start of November.
And the cold that swept across Europe this week has sparked concerns about whether countries will be stretched over the coming months. Already reserves of natural gas – which the EU requires to be replenished before winter – are being used at a worrying rate. Added to this is the fact that low winds have produced less electricity and there has been very little solar energy produced, both of which increase the likelihood of falling back on gas power stations to generate electricity.
Europe's energy crisis is placed in full relief as its heating season begins windless and cold. Natural gas storage drawdowns are the second fastest in 15 years. But the challenge is systemic, meaning long-term impacts on European homes, business, and manufacturing: pic.twitter.com/7xlopziowc
— Richard Meyer (@RichardMeyerDC) November 21, 2024
Getting the best deal
The extent to which households in Belgium will be affected by the higher gas prices depends on how long they last and the type of contract a consumer has.
Whilst experts in the energy field do not expect prices to rise to the crippling highs of September 2022 – when the energy crisis saw gas prices of over €300 MWh – it is likely that prices will remain relatively high compared to before Russia's invasion of Ukraine. Importantly, gas prices affect the prices of other energy types, as the electricity price is fixed to the most expensive source feeding the national grid – typically gas.
In Belgium, several types of energy contract are available. Those with variable contracts will be most impacted by the rise in gas prices as the cost of energy is based on the average wholesale prices for that month: if gas costs more on average, the bill at the end of the month will be higher.
By contrast, fixed contracts – especially those where rates were set earlier in the year when prices were lower – offer some protection from the rise in prices. However, changing from a variable contract to a fixed contract as prices are now high again will only protect consumers from costly bills if gas prices go up even further, which is difficult to predict.
An analysis by RTBF noted that last year energy prices started to fall from December. Were this to happen again this year, this would be a relief for those with a variable contract. And it would also mean that signing a fixed contract now would mean paying more for the duration of that contract.
Unfortunately, energy markets – like the weather – are difficult to predict. However, Belgium will see a dramatic swing in temperatures next week, which at least will reduce demand for gas as consumption for heating will fall.
