Power and particularly gas markets surged in the second week of March to yet further new highs as the situation in Ukraine deteriorated. From an energy perspective, the main focus was sanctions, and if these would cover oil and gas. This led to $130/barrel oil and the surge in petrol prices we have seen, but also remarkably at one point, April ’22 gas at over 25pence per kWh. As it became apparent that sanctions would not be implemented and the move away from Russian supplies by Europe would be more gradual, so the surge reversed. Prices remain well in excess of pre-invasion levels, but the real crisis seems to have passed, for now – evidently Russia’s next move is key, but greater emphasis on peace talks has made for a much calmer (if still inflated) market.

The war has brought into focus the West’s reliance on Russian energy and alternatives are being rapidly sought. Whilst the current energy crisis is delivering record costs, it will be interesting to see how the new energy mix pans out, with greater renewables, battery storage, new nuclear and hydrogen coming to the fore. It seems likely that Russia’s actions have sped up the journey to Net Zero as leaders acknowledge we cannot and should not rely on fossil fuels from unscrupulous regimes.

Back