Oil, natural gas and electricity prices are creating the conditions for an exceptionally expensive winter, with energy costs simultaneously putting pressure on heating, transport and electricity bills. The latest escalation in the Middle East is reigniting concerns that the international rally will not be short-lived, shifting the burden onto household budgets just before the heating season begins.

With Brent closing yesterday at $106 a barrel, heating oil is expected to start on 15 October at around €1.80–€1.90 per litre, compared with approximately €1.10 last year. This represents an increase of around 64–70%, threatening to make the first fuel purchase of the winter unaffordable for many households.

At the same time, the average nationwide price of unleaded petrol on 13 September stood at €2.149 per litre, while diesel stood at €2.108, maintaining pressure on drivers, transport operators and businesses. The energy domino effect is now spreading across the entire economy: from heating costs and transport to production, the movement of goods and, ultimately, prices on the shelves.

Expensive gas, more expensive electricity

At the same time, the price of natural gas at the European TTF trading hub closed yesterday at close to €82 per megawatt-hour, heralding a much more expensive winter for households that heat their homes with gas. Based on current prices, the additional burden compared with last year is estimated to reach at least 40%.

Expensive gas inevitably feeds through into electricity generation as well. For today, 15 September, the price in the day-ahead market stands at €170.25 per megawatt-hour, down from €186.76 yesterday. Despite the slight easing, the market remains trapped in an upward run of exceptionally high prices.

The average September price is already hovering around €160 per megawatt-hour, approximately 20% higher than in August. Greece continues to record a lower wholesale price than several European markets, but this does not remove the pressure being created at the retail level. If natural gas and wholesale prices remain at these levels, suppliers will find it difficult to avoid price increases in the variable, “green” tariffs in the coming months.

The warning bell for LNG

Adding to the already heavy bill is concern over the future of natural gas in Europe. Industry executives are warning that the forthcoming full ban on Russian natural gas imports by the European Union could worsen the energy crisis and push prices even higher.

As Metlen chief executive Evangelos Mytilineos pointed out to Bloomberg last week, the situation in the LNG market is becoming increasingly critical and is beginning to resemble the conditions that prevailed in late 2022 and early 2023, when the previous energy crisis peaked.

The warning carries greater weight as governments and businesses reduced natural gas purchases during the summer, leaving European storage facilities today at just 67% of their capacity. Europe is now being called upon to secure significant additional volumes ahead of winter, in a market where the Middle East is keeping oil and LNG under constant geopolitical pressure.

Under these conditions, analysts do not rule out European prices once again exceeding €100 per megawatt-hour. Such a scenario would burden not only household bills, but also Europe’s energy security and the competitiveness of European industry.

Pressure from Saudi Arabia

Against the backdrop of the new round of price rises is the limited operation of Saudi Arabia’s East–West pipeline, following the recent strike on a critical facility. The pipeline is the main alternative route for transporting oil from the Persian Gulf to the Red Sea ports when passage through the Strait of Hormuz becomes unsafe.

The damage is expected to take weeks to repair, increasing the risk of a loss of up to 4% of global oil supply if Riyadh’s export capacity is not restored soon. Repairs could take up to five weeks.

The pressure is being intensified by the consolidation of the presence of the Iran-backed Houthis at key points around the Bab el-Mandeb Strait. The development also threatens the western maritime route for Saudi exports, adding a second lever of pressure on energy flows beyond the Strait of Hormuz.

Subsidies on the table

These conditions are bringing the need for state intervention back to the forefront. Petrol station operators are calling for a subsidy directly at the pump for heating oil, in order to limit the burden from the very first purchase.

Minister of National Economy and Finance Kyriakos Pierrakakis referred the issue back to October yesterday, stating that the government would stand by citizens if necessary. “At this moment, I remind you that diesel is subsidised at the pump. So in October, when we get to the discussion on heating oil, we will be here and we will have it – and from a different position as a country,” he said, declaring that the government would support citizens in every way.

With winter approaching, the government is assessing whether to continue the subsidy on transport diesel after its expiry in September, as well as maintaining the discounts offered by the two refineries on petrol and diesel.

Within the same framework, a new structure for the heating allowance is also being considered, so that the pool of beneficiaries can be expanded and the level of support increased. Last year, the allowance ranged from €100 to €800, while in areas with particularly low temperatures it could reach as much as €1,200.

Minister of Environment and Energy Stavros Papastavrou has also left open the possibility of subsidies for fuels and electricity if developments make them necessary. As he has stated, “the measures that were in force in August and September will be examined and we have to wait for certain developments”.

Describing the rationale behind the interventions, Mr Papastavrou stressed that Greece cannot change the geopolitical developments shaping the price of oil, but it can create a “buffer” and limit their impact on all citizens.