Why is Europe expensive?

The rise in gas and oil prices in abundance implies that households across Europe face more expensive energy bills this year, and not only.

Meanwhile, the region's most sensitive parts will face lack of fuel, consumer associations said.

Why the Prices Are High

Power companies pay the price of most when they buy gas and electricity, which they sell to consumers. As in any market, prices rise and fall, and the price movement is driven by supplies and demand.

Usually, prices rise during the winter in response to the highest demand for heating and electricity, while falling during the summer.

Prices began to rise beyond normal rates last September, and since then they have increased even more due to the obstacles in supply related to the Russian invasion of Ukraine that started on February 24th.

Shortly before the war began, the German government banned the operation of the North Stream gas pipeline 2, which would double Russian gas supplies to Europe. Then, in July, Russia reduced the amount of gas transported through the Northern Stream pipeline 1 to 20 percent of capacity. Moscow said that lowering supplies concerns maintenance.

The German government said this pretext used by Moscow to counter Western sanctions, which were imposed because of the war in Ukraine.

Nuclear power cuts in France and the heat wave that has hit Europe this summer have also increased demand.

Standard gas prices in Europe at the Dutch TTF Centre have increased almost 350 percent year-on-year, while one-year German and French contracts have increased by 540 percent, respectively, by 790 percent.

How long can this situation last?

Many gas market analysts expect prices to continue to be high in the next two years or longer.

World gas and coal competition this year is expected to prevent prices from falling. Any further disruptions of Russian gas supplies, such as a complete stopover of supplies through North Stream 1, will contribute to price hikes.

While European states are on a good track to fill gas deposits at the minimum rate of 80 percent by October 1st, a cold winter may drain those reserves very quickly.

Why are retail prices rising?

Many energy suppliers apply high prices to consumers as well, through their retail fees. In Britain, for example, the price for sale in large quantities may amount to 40 percent of totals.

Suppliers can buy energy in the majority markets on the day they want to receive product delivery, a day before or months and seasons earlier, as they try to predict when prices will be cheaper and how much they have to buy to cover the needs of their consumers.

If suppliers do not buy enough energy, they will be forced to buy more at prices that could be higher, depending on market movements.

Government Actions

In July, the European Union asked member states to reduce the gas demand voluntarily for 15 percent this year, with the possibility of it becoming binding.

Some European governments had taken measures to reduce consumption before this EU announcement, as well as air conditioning and heating laws in public and commercial buildings.

Germany has moved to the second phase of the three-stage emergency gas plan. The third phase envisions that gas will be cut off in the industry.

This state will also set gas fees to distribute the high cost of replacing Russian gas among consumers. The measure is expected to take effect in October, but could cause energy tariffs to rise by 480 euros annually.

Governments have also announced measures such as subsidies, removal of environmental taxes or Tax on Added Value (TVSH) from bills and ceiling prices.

Britain, which is highly dependent on heating gas, has presented ceiling prices for most energy tariffs in 2019, setting a limit on the amount paid for power units, but also sets the 1.9 per cent limit on supply benefits.

However, this margin is estimated to have increased over 4,200 pounds per year, according to January data, or 230 percent more compared to the previous year.

What can consumers do?

Amateurs make up 30 to 40 percent of Europe's gas demand. About 80 percent of households ' gas demand is heating, while the rest are for hot water and cooking.

Usually, the demand for gas is higher during the winter, or from October to March.

According to analysts in Brandstein, some household measures could drop for a third of the gas demand among households.

Lowering thermostats from 20 to 19 degrees Celsius could lower the demand for gas per cent. And if citizens were to lower their thermostats for another degree, then demand would be down 7 percent.

The clothing of the fattest sweaters in the home during the winter season can drop by 4 percent the demand for gas.

Postponing the release of heat between October and November or stopping the heat in February and not March can save 3 to 6 percent. Disused radiators in unused rooms, replacing shower heads with water - saving species, and using boilers twice per day can reduce gas demand to another 7 percent.

In Britain, a campaign has started calling for the release of energy bills at more affordable levels and is urging citizens to stop direct energy payments since October.