In the last couple of weeks, Bord Gáis Energy, SSE Airtricity and Energia have all announced they will introduce customer price hikes for both gas and electricity from October.
Pinergy announced an increase in electricity prices in August, while Flogas, Yuno Energy and Electric Ireland all increased their charges in recent months.
The reason behind the price increase is the jump in gas prices seen so far this year (see Figure 1). The worrying news on that front is gas prices have risen even further since the recent price hikes by energy suppliers were announced, suggesting that there could be even more prices increases to come.
Ireland still relies on gas to produce over 40% of the country’s electricity, and is almost unique in Europe, in having no effective stockpiles of the essential fuel.
While major consumers of gas such as electricity generating companies (and dairy co-ops) can hedge some of their costs through using futures contracts, there is no escaping a sustained increase in gas prices.
As previous futures contracts roll off, the cost of buying replacement contracts for future delivery will closely match current prices.
Unfortunately, the outlook for those prices is not great for a couple of reasons. The conflict in the middle east and the ongoing Russian invasion of Ukraine have both led to shortages of supplies.
Asian demand for liquid natural gas (LNG), which was met by exports from the Gulf region, is increasingly been served by LNG exports from the US. The US has also become increasingly important for EU supplies in recent years, as the region cuts off imports from Russia.
The growing competition for those supplies inevitably has a knock-on effect for prices for European customers.
Stockpiles
The EU traditionally uses the summer months to refill its gas stockpiles. The exceptionally hot and dry summer caused curtailments in electricity generation from sources such as nuclear (which had difficulty getting sufficient cooling), and was replaced by gas-powered generation.
This has led to the situation where the current level of EU stockpiles is at the lowest in more than five years. At the time of writing, EU gas storage was 68% full. The average level for second week in September over the past five years has been 84% full, and the current level is the lowest since at least 2013.
Current EU rules require gas storage to be at 90% capacity by 1 November, but countries can deviate from that during periods of market turbulence. The gas market is certainly in a turbulent place at the moment.
This is not to suggest that the EU could run out of gas this winter. Production and imports will continue, but Goldman Sachs suggest gas prices might rise to €100/MWh by December, as the continent is forced to meet high demand through market purchases rather than relying on gas stockpiles acquired during the summer months.
Fuel prices
There is little sign of relief coming in oil markets. The situation around the Strait of Hormuz has deteriorated again in recent weeks, with fresh attacks on shipping in the key waterway. There are also fresh concerns about shipping crossing the Red Sea near Yemen, as forces backed by Iran made significant gains in the region.
Adding to this pressure on fuel prices is the severe shortage of global refining capacity, particularly for diesel. Prices at the pump for Irish drivers have again topped €2/l in recent days, while the cost of home heating oil and green diesel have shot up since the end of August
Saudi Arabia closed its east-west crude pipeline, which was supplying the product for shipping from its Red Sea port, on Monday after it was attacked. This helped push global benchmark Brent close to $110 (€95) a barrel by Monday afternoon.
Adding to this pressure on fuel prices is the severe shortage of global refining capacity, particularly for diesel. Prices at the pump for Irish drivers have again topped €2/l in recent days, while the cost of home heating oil and green diesel have shot up since the end of August (Figure 2).
It is worth noting that the excise cuts introduced by the Government in April, and recently extended until November, took 32c off the price of a litre of diesel at the pump. However, there was little room for tax cuts on home heating oil or green diesel, meaning current prices for those are heading towards their April peak.
Wider effects
As we know from 2022, high energy costs rapidly feed through to the wider economy. For farmers, the increases are felt directly in electricity, gas and fuel costs, but will also have knock-on effects for fertiliser prices in the coming months.
The ECB last week increased the cost of borrowing, and is likely to introduce further increases before the end of the year, as rising energy costs drive inflation in the euro area, inflating the cost of debt servicing.
Higher loan and working capital bills, coupled with higher energy costs, will have negative effects on costs for dairy processors, putting pressure on the price they can pay for milk over the coming months.
Fortunately, the Irish dairy sector is entering its quieter months, with around 70% of the annual milk supply delivered by the end of August.
The real risk for the dairy sector will emerge in the spring 2027. If energy costs remain elevated until then, and there is no recovery in global dairy markets, it could turn into a particularly tough start to the year for that sector.
Comment
Ireland and Europe are, for the second time in five years, facing a winter of high energy prices.
With less than a month to go to the budget, the Government will be coming under extreme pressure to provide relief for those hardest hit by the price increases. With little room to do anything on excise, and politicians downplaying the chances of a new energy credit, it is difficult to see how much can actually be done in the short term.
In many ways, the short term is at the heart of the problem.
Ireland has made progress over the last five years when it comes to the renewable share of the country’s total energy needs, but looking at the data on the national energy balance produced by the Sustainable Energy Authority of Ireland (SEAI), it is clear that the added renewable capacity has only been large enough to replace the domestic gas supply lost since 2020 due to the slowdown in production from the Corrib gas field.
That, coupled with the ending of electricity generation from peat means that, according to the SEAI, Irish energy production was at the lowest level since 2016 in 2025 (see Figure 3). This left the country reliant on imports, and global markets for 80% of our total energy needs.
Short-term strategies aimed at fire-fighting the latest crisis will do nothing to move the needle there. While energy independence for Ireland is little more than a pipe-dream, maximising the share of energy produced here is exactly where policy should be concentrated. Otherwise, we will be back in facing the same crisis again and again.