The impact of the Israel-Hamas conflict on energy prices
The attack of Hamas on Israel has caused oil prices to spike, due to concerns that the conflict could disrupt Middle East oil production.
The increase has been over 3%, however, industry experts believe that the overall impact on energy prices is likely to remain limited as long as no other third-party gets involved, given that Gaza and Israel aren’t major oil players.
Gas prices also rose as a result of the shutdown of the Tamar natural gas field off Israel’s coast, as the escalation of the conflict raised safety concerns. The UK day-ahead gas price soared to 95p a therm – a 19.5% increase - and the month-ahead contract saw a 15% increase to 108.65p a therm.
The conflict has also caused 16% of flights to Tel Aviv’s Ben Gurion airport in Israel to be cancelled. This has led to a drop in share prices across multiple airlines, including a 5.8% fall for easyJet.
How to navigate uncertainty
As we enter a new period of uncertainty and volatility in the energy market, it’s important to emphasise that the impact of the current hostilities is not remotely close to the threat of Russia’s ongoing invasion of Ukraine.
However, it is an additional political issue that threatens the stability of the energy market.
Our advice is for businesses to consider switching to a flexible energy contract, to help mitigate the possibility of further price increases and as an effective way to spread risk.
Flexible thinking
The possibility of high energy prices remains a lingering concern generally, particularly as energy demand increases over the coming winter months.
As the Government support provided through the Energy Bills Discount Scheme comes to an end in March 2024, businesses should have a long-term energy management strategy designed to take advantage of forward pricing curves and reduce risk exposure.
Buying all your energy at one time for a fixed period can leave you exposed to short term market conditions that affect the overall price of your contract.
Flexible energy contracts are a great way to navigate the volatility of the wholesale market, as you won’t be required to make a decision based on the market position on one day, helping to mitigate some of the risk to your business.
Looking at the market three or four years ahead allows you to take advantage of wholesale market fluctuations and move quickly when the market is favourable. Unlike fixed purchasing, it enables you to spread risk when the markets are high.
The good news is that smaller businesses can benefit from a flexible contract as well as large corporates through our collective purchasing power.
How we can help
If you’d like further information on flexible energy contracts, our flexible energy eBook is a great place to start.
To discuss how flexible procurement can benefit your business, please contact our Client Relationship Managers:
Contact Nigel Addison-Evans on 07500 027480 or email him at nigel.addison-evans@cec.uk.com
Contact John Loizou on 07425 102 023 or email him at john.loizou@cec.uk.com
