This week, Flogas became the first domestic energy provider to offer a one-year fixed price contract to customers since early 2020.

It's focused attention once more on gas and electricity prices and what's been happening in energy markets roiled by the Russian invasion of Ukraine and the ongoing war.

One thing we all learned in 2022 is that through a complicated pricing system, the price of gas determines the price of electricity.

So, the two energy sources are inextricably linked in what they mean for the utility bills we all pay.

Have gas prices fallen?

Wholesale prices have fallen significantly since their peak last August and are now back to below what they were before Russia invaded Ukraine.

Take a look at the graph below. It shows prices on the Dutch Title Transfer Facility. That's the futures exchange where the price of gas in Europe is set.

Credit: theice.com

Prices peaked in August last year as utilities and gas companies bought up supplies of gas in advance of the winter amid concerns that supplies could fall short of demand.

Today, prices are roughly at a fifth of their peak, falling by as much as 50% since December alone.

Irish gas suppliers buy most of their gas on the British National Balancing Point, which is the UK futures market.

The price falls on the British market broadly match the movements on the Dutch market.

Why have gas prices fallen so steeply?

One reason is the weather has been relatively mild this winter, so far.

That's meant less demand for gas for heating. There have also been efforts to cut back on using gas.

Another related reason is that for countries that store gas, the rush to stock up in advance of the winter has meant there's less demand to replenish stocks that haven’t been used as much due to the weather.

Stocks across Europe are reported to be at over 80% capacity.

In Germany, according to its gas storage operators' association, units are 91% full.

So, do we now have as much gas as we need?

Right now, yes.

In simple terms, Europe drastically reduced imports of gas from Russia last year and replaced them with a massive increase in imports of Liquified Natural Gas (LNG) from countries like Qatar and the US which arrive by ship.

And what about the rest of the year?

Europe will continue to import LNG but it will need to import more than last year because there will be less coming from Russia, as long as war continues in Ukraine.

The Chinese economy is tentatively emerging from Covid restrictions so that will add to demand for LNG globally.

Europe has proven adept at defying the worst predictions over gas supplies last year.

This year is off to a good start but with the almost complete absence of Russian gas and China back in the market, securing sufficient supplies will be a bigger challenge.

Enough about Europe, what about us?

It's true that we import 75% of our gas via a pipeline from the UK and by extension Norway.

But we can’t ignore what's happening in Europe.

That's because the prices set there have a knock-on effect on the prices we pay.

But also, when concerns were at their height over the supply of gas to Europe, the possibility of rationing was very real.

Norwegian gas was in the spotlight.

The UK imports half of its gas needs and just over three quarters of its imported gas comes from Norway.

So, if Norwegian gas were drawn into a broader European supply crisis, it will have an impact on us.

Can't we just stock up now while gas is cheapish and hope for the best?

No. We have no gas storage facilities and no plants to process imported LNG into the gas network.

The Department of Environment, Climate and Communications is several months into a public consultation process to come up with recommendations based on an external report into Ireland’s security of energy supply.

That may or may not result in some gas storage system being built on the island.

In the meantime, we will row with the market.

I really just want to know if and when my gas and electricity bills will come down?

Part of the answer to this involves looking at the price of gas two years ago.

In January 2021, the price of gas on the UK market was around 50 pence sterling per therm.

Today it's around £1.70 per therm. At its peak last August, it was around £8.00 per therm.

Credit: theice.com

The point utility companies make when trying to explain the prices they charge and to temper expectations of the extent to which prices may fall, is that domestic bills didn’t go up as much as wholesale prices did.

On the flipside, they’re unlikely to fall by the 80% or so that wholesale prices have since their peak.

In other words, utility companies will purchase quantities of gas at different times and at different prices over time which enables them to hopefully 'hedge’ or protect against the worst craziness of where prices can go. And, they will also aim to protect themselves when prices fall again.

We the customers, are left to trust in the magic of competition which will favour the company that manages to buy cheaper and better than its competitors and then pass it on to their customers.

That's a biggish leap of faith in a market characterised by a relatively small number of big companies.

Energy prices, apart from a complicated and very high cap agreed at EU level, aren't regulated here.

So, the short answer is perhaps not as soon as you think and definitely not back to prices we paid as little as two years ago.