What will happen to gas and petrol prices if Russia invades Ukraine?

Russian military vehicles on a railway platform on their way to attend a joint military drills in Belarus
Russian military vehicles on a railway platform on their way to attend a joint military drills in Belarus. Credit: AP

Words by ITV News Multimedia Producer Connor Parker

The ongoing military crisis on the Ukrainian border is increasingly worrying world leaders, with Boris Johnson warning Russia that an invasion would be a “disastrous step”.

Military conflict in the region would have a wide reaching impact on the global economy too.

What has Ukraine got to do with gas prices?

Ukraine is not a major supplier of gas so it may be surprising to find a crisis in the country could lead to a rise in prices.

But the country's infrastructure and geopolitics is important.

Since the end of last year, Russia has been amassing soldiers on Ukraine's border, with US and Ukrainian officials warning an invasion could be imminent.

The UK has even accused the Kremlin of preparing a former Ukrainian MP to take over once Russia has toppled the current government.

Although no Western nation has promised to put their soldiers on the line in Ukraine to fight the Russians they have pledged their support in other ways.

Most notably the US, UK and EU have pledged severe sanctions against Russia if they do invade, which would in effect lock their financial markets out of the global system.

Dr Jack Sharples, a research fellow at the Oxford Insitute for Energy Studies, told ITV News Russia could limit gas supplies to Europe in retaliation for any sanctions.

He said: "If they do anything to limit the supply the current European gas market is so tight right now that it would have an immediate effect on prices."

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Many of the gas pipes that go from Russia to Europe run through Ukraine.

Although the UK doesn't benefit directly from these pipes, that mostly supply southern and central Europe, Dr Sharples said the close integration of Europe's gas markets would impact the whole continent.

If a war did break out the pipes and supply stations could be damaged, restricting the flow of gas, and suppliers could say they simply feel it is too much of a risk to use the pipes while a conflict is going on around them, severely limiting supply.

Would Russia limit the supply of gas to Europe?

This is hard to tell, some have argued Russia has already been doing it for months.

This is because a new pipeline called Nord Stream 2 which has been laid under the Baltic sea has not been activated.

The US, Ukraine and some European nations have put intense pressure on Germany - the country set to benefit most from the new line - not to activate it, much to the frustration of Russia.

The US does not want the pipe to open due to fears it could increase Russia's influence in Europe.

It was completed in June 2021 and since then Gazprom has been accused of reducing gas supply - and therefore increasing prices - in order to pressure Europe into turning it on.

But any further limiting of supply would not be risk-free for Russia.

Russian soldiers take part in drills at the Kadamovskiy firing range in the Rostov region in southern Russia. Credit: AP

Dr Sharples described it as a "lose lose situation" pointing out half of Russia's national budget came from its oil and gas sector, so deliberately reducing supply would impact their economy.

Could Europe get gas from elsewhere?

Yes, Europe could, but it would not be enough to replace Russia's supply and it would be expensive.

Dr Sharples said: "The problem is one of volume really, Russia is by far the largest supplier of gas to the European market."

He said Europe consumed around 480bn cubic meters of gas last year, of which around 140 came from Russia.

Some years almost half of Europe's gas comes from Russia.Norway supplied around 110 bn cubic meters and around 100 came from the global Liquified Natual Gas market (LNG).

It is from the LNG market Europe would be forced to plug the gap left by Russia.

ITV News recently reported that the US was working with a number of nations to increase the supply of LNG to Europe in order to offset any reduced supply from Russia.

The US is very aware that Europe's reliance on gas may lead them to lessen their response to Russian aggression.

To shore up political support, the US government has requested that Qatar, the world’s largest exporter of LNG, finds a way to help provide supplies, perhaps redirecting shipments assigned to Asian countries if an agreement can be reached.

Ultimately if Dr Sharples said: "If Russian gas supplies were to be completely cut off there is no way we could replace that at short notice, no way at all," although he said this scenario was "quite unlikely."

How does this come back to your energy bill?

The UK is already experiencing a sharp rise in cost of living, with inflation at the highest and is expected to reach 6%.

The UK only gets around 3% of its supply from Russia, but due to Europe's integrated energy markets, it would be impossible to avoid the knock-on effects of reduced supply.

Emma Pinchbeck, chief executive of Energy UK, the trade body for suppliers, said bills were expected to rise not just in April but again in October “if nothing changes” as the spike in wholesale gas prices fed through to domestic bills.

Ms Pinchbeck said of the price rise: “We haven’t seen anything like this, not in my career or in any of the people who sit on my board.”

Russian troops have been mobilising near Ukraine for months Credit: AP

She said that although wholesale prices were expected to drop, “they are still three times higher than we expect to see at this time of the year” and described the situation as “enduring”.

Citing analysts, she said Ofgem’s price cap could increase to £2,400 in October following an increase to “around £2,000” in April.

Consultants Cornwall Insight has predicted the price cap set by regulator Ofgem could rise from £1,277 to £1,865 in April.

This rise only factors in the increase in gas prices that happened last year, which saw many companies go bust after the price of a cubic meter of gas rose from €15-30 (£12 to £35) to more than €100 (£84).

It has now settled around €80 (£67) but this is still far higher than ever before.

If the conflict in Ukraine escalates the price could rise even further, and push the cap up even more.

With many people relying on the price cap for their bills, including the millions of people who have been put on variable deals after being absorbed by larger suppliers following the collapse of their energy company, the large rise could put strain on a lot of pockets.

What happens next is anyone's guess but Dr Sharples said: "It's very much within Gazprom's power to alter prices if they were to put a lot of gas on the market now prices would fall significantly but if tensions really ratchet up and we see a military conflict in Ukraine then I think we could easily see gas prices back over €100, which would mean the price cap would be substantially lifted in April."