The current state of play within the energy market has been likened to the well known phrase “picking up pennies in front of a steam roller”
Businesses are understandably looking for energy prices to recover to pre-2021 levels, buoyed by the huge drop off since the start of 2023.
But markets have been relatively stable for the last 3-4 months, with a clear resistance point at £120/mWh – roughly double the wholesale rate from pre-“energy crisis” levels. So, any further decreases here look to be relatively minor.
To apply the steam roller analogy here may come across as little facetious, as even the smallest of reductions are still significant for businesses.
But what the steam roller analogy gets right is the relative high risk vs. the reward. There has been no extreme bad news for energy markets this year. But the market is clearly nervous. Should we have a bad news event (think LNG plant explosion at Freeport, USA from last year or the withdrawal of a large gas asset in Europe) prices will move upwards very substantially and very quickly.
A steam roller moves very slowly. So if you’re in front of it picking up pennies, the chances of it hitting you are fairly slim. But the longer you stay there, the higher the risk becomes. Something energy buyers may want to keep in mind.