Gas prices stay at elevated levels as Algeria reduces gas exports to Spain and four more suppliers exit the market
The energy crisis that has seen nineteen UK energy suppliers go bust since August could be exacerbated over the coming days and weeks as a clash between Morocco and Algeria has raised the prospect of further price rises.
Upward pressure on gas prices
Gas prices had dipped over the weekend after Russia increased supplies into Europe but as the week began prices were already creeping back up.
With most of the attention being fixed on Russia when it comes to the gas price crisis gripping Europe and the UK, we shouldn’t forget that other issues are at play when it comes to threats to the region’s gas supplies.
Tensions between North African neighbours Morocco and Algeria could force prices higher over the coming weeks as exports via a pipeline that runs through the region to Spain has been blocked.
Algeria is Africa’s biggest exporter of natural gas and has utilised the Gaz-Maghreb-Europe pipeline since 1996 to deliver billions of cubic metres of gas into Spain and Portugal. The blocking of exports has already sent gas prices in Spain climbing at a time when the nation and the wider region is struggling to cope with already record high gas prices.
Following the ending of a contract between Morocco and Algeria on Sunday night, the Algerian President Abdelmadjid Tebboune ordered the nation’s energy firm Sonatrach to halt its gas exports to Spain via the pipeline.
In an attempt to diffuse the situation Algerian and Spanish officials said Algiers would, from now on, deliver its natural gas to Spain exclusively through an undersea pipeline to avoid Morocco.
However, experts have said the alternative undersea line, known as Medgaz, has a far smaller capacity than the GME. With Spain already suffering from a gas shortage and Europe being hit with already spiralling energy prices the price of gas will likely rise as a consequence.
The cost of electricity has increased by 44% over the last year in Spain, prompting the government to intervene in the energy market.
Also read: What has caused the Energy Market Crisis and what does it mean for the energy retail market?
What has caused the tensions?
Tensions between Algeria and Morocco have been growing for months partly due to Morocco normalising its ties with Israel in order to get the USA’s support in recognising its sovereignty over the disputed Western Sahara region.
Relations between the two countries deteriorated further, when the Polisario Front, which seeks independence for the Western Sahara region of Morocco, declared that it was resuming its armed struggle.
Algeria has openly supported this independence movement.
In August, Algiers broke diplomatic relations with Rabat, accusing the Moroccan side of using the Pegasus spy program against its officials, supporting a separatist group, and breaching bilateral commitments, including in the Western Sahara territorial dispute.
Also read: Energy Suppliers blame Ofgem for the crisis in the energy market
Four more UK energy suppliers exit the market
The UK energy supply market hit another grim milestone on Monday with the collapse of another four energy suppliers.
Since August, nineteen energy supply companies have now gone bust as a result of the high wholesale energy prices.
All eyes are now on Bulb energy with fears mounting that the large supplier will exit the market this week. If that happens over a million consumers will be left without a supplier and it remains to be seen whether government intervention will be needed or indeed be enough to tackle such high numbers.
Further Reading
Bluegreen Energy Services Limited exits the market
Ofgem issues a warning to energy suppliers over the use of threatening language towards customers
Dyball Associates are proud to help new supply businesses successfully launch in the UK market.
Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers get set up and start supplying.
For more information on how to start and manage an energy company, get in touch with Dyball Associates today.
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