Energy prices would have moved higher this year due to strongly recovering demand and constrained global supply, but the recent speed and extent of the price increase in gas and electricity prices in Europe has caught everyone by surprise.
I had a look at the statistics made available by the UK’s National Grid and this shows in the UK context at least the energy transition is a factor (see chart). The price spike has happened as electricity demand (A) has sharply increased in 2021 while generation by renewables (B) and nuclear/biomass (C) has decreased. As a result, the UK has needed significantly more generation from fossil (D) and imports (E). It’s a classic case of two big numbers moving in opposite directions at the same time, creating a gap that is large.