How the war in Ukraine led to higher energy bills

As the war in Ukraine grinds on towards winter, energy prices across Europe have spiralled, causing an alarming rise in people’s bills.

The continent has relied on Russia for 40% of its natural gas supply – Germany even more so – but is now facing a crisis as supplies through the Nord Stream 1 pipeline have been halted. Rates of gas supply from Russia to Europe have fallen by 89% year on year, said AP News, with European natural gas prices surging around 300% this year, according to Bloomberg data, piling pressure on the continent’s economy.

Ukraine and the EU have accused Russia of “energy blackmail” in response to the sanctions the bloc has imposed following the Russian invasion of Ukraine. The UK government continues to lay the blame for soaring energy bills on the ongoing war.

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Europe now faces the prospect of “rolling blackouts, shuttered factories and a deep recession”, according to AP, but how did the UK and the rest of the continent reach this position?

What happened following the invasion?

In the immediate aftermath of the invasion, the UK along with the EU announced a series of measures that the then PM Boris Johnson said would “collectively cease the dependence on Russian oil and gas that for too long has given [Vladimir] Putin his grip on western politics”. The response was that Russia has “choked off” supplies of “cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes”, said AP.

“Russia is weaponising gas more and more,” Kate Dourian, from the Energy Institute, told the BBC. “It is trying to show that it is still an energy superpower, and can retaliate [against] the sanctions Europe has put on it.”

How is the UK affected?

The UK receives only 5-6% of its gas imports from Russia, which is equal to 3-4% of UK consumption, according to the Energy & Climate Intelligence Unit. Though the UK imports very little gas from Russia, gas prices “are set globally and are now approximately 450% higher than they were this time last year,” said the BBC. This means that while UK supplies of gas might not be directly affected, the price it pays for gas will be.

“The market is so tight at the moment that any disruption in supply causes more hikes in the price of gas,” Carole Nakhle, CEO of analysts Crystol Energy, told the broadcaster.

What does Russia say?

Moscow has rejected claims it is using energy as a political weapon. President Putin said this week that the Nord Stream 1 pipeline was closed because of Western sanctions. “Give us a turbine and we will turn on Nord Stream 1 tomorrow. But they don’t give us anything,” he said according to Reuters.

Is Russia to blame for higher energy bills?

While it’s true that gas prices have risen sharply in the last few months due to restricted supply flow from Russia, even before the war began in February, Russia started “selling less natural gas to European buyers, draining storage and slowing pipeline flows to a trickle”, said Politico.

That caused “energy prices to spike, plunge, recover and dip again” last winter, and unpredictable gas levels. Russia’s deputy prime minister, Alexander Novak, said that volatility in the energy market was due to “the short-sighted policy of the European Union and the European Commission, which for many years has deliberately moved away from long-term contracts,” said Politico in January.

But Ofgem chief executive Jonathan Brearley told i news that Russia’s actions in Ukraine had led to last winter’s volatility in the global energy market lasting “much longer, with much higher prices for both gas and electricity than ever before.

“And that means the cost of supplying electricity and gas to homes has increased considerably. The trade-offs we need to make on behalf of consumers are extremely difficult and there are simply no easy answers right now,” he said.