Global crude oil prices fell sharply, bringing hope to Irish consumers and businesses amid the inflation crisis, but European gas prices remained at record levels as Russia’s Gazprom warned about the prospects of even higher prices this winter.
The price of Brent crude fell over 2% to $92.80 a barrel yesterday, to its lowest since before Russia’s invasion of Ukraine, as economic data spurred concerns about a potential global recession, while the market awaited clarity on talks to revive a deal that could allow more Iranian oil exports.
Brent crude for delivery in September had been trading as high as $120 a barrel in early March, helping to drive petrol pump prices at Irish forecourts to over €2 a litre soon after.
Brent crude was trading at above $100 a barrel as recently as July 27 but has steadily fallen back ever since. Crude oil prices have now fallen about 5% since the start of this week.
It should take about two weeks for big falls or increases in Brent crude oil prices to be reflected in retail forecourt prices in Ireland, as crude oil is distilled at refineries.
Crude prices fell as the EU and the US said they were studying Iran’s response to what the EU has called its “final” proposal to save a 2015 nuclear deal after Tehran called on Washington to show flexibility. The prospects of a weakening global economy also weighed on oil prices.
The news for European households and businesses was less positive as Gazprom said even higher gas price hikes were on their way this winter. The Kremlin-controlled company with a monopoly on Russian gas exports by pipeline, said prices could spike a further 60% from current levels, imposing more pain on Europe.
Irish gas supplies are not totally dependent on Russian supplies, but wholesale continental gas prices nonetheless influence the prices Irish generators have to pay for the fuel to generate electricity on the all-Ireland power grid.
Ireland taps a quarter of its gas from the Corrib field off the Mayo coast, and gets the rest from the North Sea via pipeline.
The price of wholesale continental gas edged higher following the Gazprom warning.
Prices for delivery in November and December rose by about 2% to €230 per megawatt per hour. Meanwhile, Germany secured a commitment from major gas importers to keep two floating liquefied natural gas, or LNG, terminals fully supplied from this winter.
Europe and Russia have been locked in a standoff over energy supplies since Moscow invaded Ukraine and the West responded with sanctions. Russia, which previously met about 40% of Europe’s gas needs, has reduced flows citing equipment issues, while Berlin says Moscow wants to “blackmail” Europe.
Germany’s economy is more reliant than most on Russia. It has been racing to find alternative sources of gas before winter, in case Russia cuts supplies further or halts them.
Berlin has already warned of possible gas rationing. German economy minister Robert Habeck said the new LNG supplies would “make ourselves independent and less susceptible to blackmail”.
- Additional reporting Reuters