MADRID – Ukraine is 3,000 kilometres from Spain. The war that Russia unleashed in that country is already impacting Spanish energy prices. First on the gas price, then the electricity and predictably also on that of fuel.
In barely 13 hours, since the first reports of the invasion came in, the price of gas has already risen around €13 in the daily market. The same goes for electricity. According to economic newspaper Expansion.com this equates to an increase of 1€ for every hour that passes.
The spot market has a direct influence on what end users pay for their gas bills. In addition, it exerts upward pressure on the wholesale electricity market or pool. Indeed, part of the electricity production in Spain is carried out with combined cycle thermal power plants, which use gas to operate.
Ukraine has broken the downward trend seen in both gas and electricity prices in recent weeks. Gas closed last Wednesday at €87 per megawatt-hour and has already jumped above €100.
The electricity pool has already skyrocketed at the beginning of the week due to the escalation of tensions in the Ukrainian conflict. On Monday, a megawatt-hour stood at €180, Wednesday it already exceeded €200 per megawatt-hour. In the past 24 hours, the pool rose by about €30 in one go. That is, on average a little more than €1 per hour. That means a stronger escalation than with gas. For tomorrow, Friday, the expected price is around €240 per megawatt-hour.
As worrisome as it may be, the worst is not so much the immediate effect on the market, but rather the medium- and long-term effect of the war. In just a few hours, the conflict has broken the gas and electricity futures market where energy supply contracts for the coming months and years are traded.
After the strong increases of 2021, some stabilisation followed in recent weeks. Now the futures market is out of control again. For deliveries in 2022, the light price will not fall below €200. A few months ago, prices below that limit were expected from April. No longer. The problem could even extend to 2023.
For years, the figures that were considered normal were between €40 – €60 euros per megawatt. For gas supplies, all futures contracts are going up and it will no longer be possible to see prices below €80 in the coming months.