Gas prices are likely to stay high for years, but petrol prices should fall back sooner, according to new analysis.
The Centre for Economics and Business Research warned that “the cost of heating your house on gas may well stay up for years rather than months” as Europe faces the potential loss of Russian supplies and infrastructure challenges in replacing them.
However, it said there was “some hope for early relief at the petrol stations” as it believed that a series of factors “should work to bring the price of oil down by the end of the year”.
Prices for both oil and gas have surged since Russia’s invasion of Ukraine amid uncertainty about supplies, pushing up prices at the pump and home heating costs. Russia is the biggest exporter of oil and oil products to global markets and supplies about 40 per cent of Europe’s gas. Western buyers have boycotted Russian oil and the United States has imposed an oil embargo.
However, the CEBR said oil prices should be eased by production increasing elsewhere, strategic stockpiles being released and high prices denting demand. It said its models were in line with a forward market that predicts Brent below $90 a barrel in 2024 and that “much of that fall is forecast by December 2022”. FairFuelUK said this should translate to a reduction of 8p a litre in prices at the pump. Brent was at about $104 a barrel last night.
Gas markets are much more regional. Moscow has threatened to cut the gas it supplies by pipeline to Europe unless it is paid in roubles, while pressure is mounting for European nations to boycott Russian gas as evidence of atrocities in Ukraine grows. Replacing Russian gas will require new liquefied natural gas terminals. “Until terminals are built and operating and demand is reduced, Europe has to choose between facing a recession and continuing to buy Russian gas,” the CEBR said.