Finance

Russia Ukraine: Gas prices jump and household bills also set to rise

Fears have been raised over how the Russia-Ukraine conflict will hit UK households (Picture: EPA/Getty)

A major gas pipeline between Russia and Europe has been halted, causing gas prices to surge and sparking fears UK household bills could rocket.

Germany has taken the decision to hold the approval of the Nord Stream 2 pipeline in response to Russia’s actions in Ukraine.

The step was the first big move by a world leader to hit Russia with sanctions after president Vladimir Putin ordered troops into separatist regions of Ukraine.

While sanctions are intended to hurt Russia, the actions, along with uncertainty over the situation in eastern Europe, could also hit British households in the pocket.

Europe relies on Russia for large amounts of oil, gas and wheat, and experts have warned conflict could lead to soaring energy prices and disruption to shipping routes.

The blocking of Nord Stream 2 saw benchmark European gas prices jump by 13% yesterday, while the UK equivalent rose 8%.

US crude oil prices jumped 1.4% after earlier rising more than 3% and energy markets remained volatile following the jump in European natural gas prices.

European stock markets, which have been particularly sensitive to developments in Russia and Ukraine, also closed lower.

Map shows how natural gas is imported into Europe with both pipelines and ports.

How natural gas is imported into Europe through pipelines and ports (Picture: Associated Press)

Map for targets and previous explosions in Ukraine/ Russia Locator Ukraine Russia crisis Picture: metro.co.uk

This map shows where explosions have been recorded in the Russia Ukraine crisis and key locations (Picture: metro.co.uk)

The Nord Stream 2 pipeline runs alongside Nord Stream 1 under the Baltic Sea from Russia to Germany and was commissioned to help the nation meet its energy needs.

The 764-mile long pipe is a massive, lucrative project for Moscow but has been criticized by the US for increasing Europe’s reliance on Russian energy supplies.

The pipeline was completed last year and is full of gas, but has not started operating yet because it is waiting for approval from Germany and the European Commission.

But German Chancellor Olaf Scholz announced yesterday he had blocked certification of the pipeline in response to Russia recognizing separatist-held regions in Eastern Ukraine.

Mr Scholz said Russia recognizing the independence of rebel-held areas in Ukraine marked a ‘serious break of international law’ and that it was necessary to ‘send a clear signal to Moscow that such actions won’t remain without consequences’.

(FILES) This file photo taken on September 7, 2020 shows the Nord Stream 2 gas line landfall facility in Lubmin, north eastern Germany, on September 7, 2020. - German Chancellor Olaf Scholz said on Februrary 22, 2022 that he was suspending the Nord Stream 2 pipeline project with Russia in response to Moscow's recognition of two breakaway regions in Ukraine.  (Photo by Odd ANDERSEN / AFP) (Photo by Odd ANDERSEN/AFP via Getty Images)

German Chancellor Olaf Scholz has suspended the Nord Stream 2 pipeline project with Russia (Picture: Odd Anderson/AFP)

Politicians and experts have warned the crisis in Ukraine will inevitably lead to an increase in the cost of energy.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, told MailOnline oil and gas prices ‘are marching upwards’ and there could be ‘even higher prices to come’.

‘Wars are by their very nature inflationary and this would particularly be the case with Ukraine, when considering Europe’s dependency on Russia for oil, gas and key ingredients like wheat, so sanctions would hit hard and shortages of supplies could see prices shoot up further, ‘ she said.

‘Already petrol and diesel have hit fresh highs at the pumps causing yet more pain for consumers already caught in the grip of the cost of living crisis.

‘The extra pounds on bills are piling up for hard hit families, with the increase in fuel, energy and grocery bills set to hit lower income households harder as a higher proportion of their outgoings will be spent on travel costs.

Close up of Gas and Electric bills.

Sanctions on Russia could have unintended consequences on UK households (Picture: Getty Images)

‘With budgets being squeezed further the likely knock-on effect will be a hit to consumer confidence after any lockdown savings are worn away.’

Fears have also been raised over how the Russia-Ukraine conflict will hit households in Northern Ireland.

Gordon Lyons, Stormont’s economy minister, told the Assembly yesterday the situation demonstrated why Northern Ireland needed to move towards creating as much of its own energy as possible, and end its dependence on fossil fuels.

‘The news about the last couple of days in terms of Ukraine and also the news from the German chancellor today will inevitably lead to an increase in the cost of energy in the UK,’ he said.

‘We don’t depend overly heavily on Russian gas, our supplies come from elsewhere, but it will have an impact on world markets.’

UK household budgets are already being put under increasing pressure amid rising energy costs, inflation and tax hikes, and the news costs could soar further will be unwelcome to many.

The average price of a liter of petrol and diesel at UK forecourts on Sunday was 149p and 153p respectively, the RAC has said.

While the Office for National Statistics announced last week the Consumer Prices Index (CPI) inflation reached 5.5% in January – up from 5.4% in December.

The announcement means the CPI is at the highest point since March 1992, when it stood at 7.1%.

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