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There is ‘no question of the lights going out this winter’

Global gas price increases hit UK

Businesses and consumers around the world are being hit by an increase in the world price for natural gas – up by as much as 300 percent compared to last year and 70 percent since August.

In the UK, it means that some smaller electricity companies are in danger of going out of business – with some companies asking for a government bailout. But Business Secretary Kwasi Kwarteng has assured that “There is no question of the lights going out this winter…There will be no throwback to the 1970s”.

Business Secretary, Kwasi Kwarteng. Photo: Pippa Fowles / No 10 Downing Street

The increase is also having a domino effect on other sectors of the economy, first resulting in the closure of two fertilizer companies that produce carbon dioxide, and because of that threatening the supply of meat and other products that rely on carbon dioxide to supermarkets.

According to the Office of National Statistics (ONS) there are several reasons behind global price increases.

“Current prices reflect a number of factors including:

  • as the world comes out of COVID-19 lockdowns and economies reopen, we are seeing an uptick in global gas demand this year.
  • combined with a cold winter (which has an impact on gas demand as gas is often used for heating homes) this has led to a much tighter gas market with less spare capacity
  • in particular, high demand in Asia for Liquified Natural Gas (LNG), natural gas transported globally by ship, means less LNG than expected has reached Europe
  • some essential maintenance projects rescheduled from 2020 due to coronavirus coincided with necessary scheduled projects in 2021, while weather events in the US have adversely affected their LNG exports to Europe,” the ONS says.

Since publishing that list of reasons, Russia has reportedly restrained its production of natural gas for Europe, helping to push prices up further.

On the question of whether the UK’s gas supply is at risk, the ONS says:

“The Great Britain (GB) gas system has delivered securely to date and is expected to continue to function effectively, with a diverse range of supply sources and sufficient delivery capacity to more than meet demand.

“While our largest single source of gas supply continues to be the UK Continental Shelf (approximately 48% of total supply in 2020), the maturity of that source means we have to supplement supply from international markets.”

“Protecting consumers is our number one primary focus, “ Business secretary Kwasi Kwarteng told parliament today, in an effort to calm fears.

“We have sufficient capacity and more than sufficient” to meet demand he said.

“There is no question of the lights going out this winter…There will be no throwback to the 1970s,” he said in an attempt to dampen fears.

The consumer may end up paying more for energy this winter

“Increased demand coupled with reduced supply globally has put increased pressure on the price of gas” he noted.

“While we are not complacent, we do not expect  emergency supply this winter,” Kwarteng said in his lengthy statement to the parliament.

“We aren’t reliant on any particular supplier for gas,” he said, noting an “excellent relationship” with Norway that delivers 30 percent of the UK’s supply. He said that country will be significantly increasing its supply to meet demand.

Smaller energy suppliers will be exiting the market “but that is not unusual” he said.

The govt will not be bailing out failed companies, he said, adding that the tax payer would not be expected to prop up companies with poor business models.

Customers must be protected from price spikes.

Kwarseng outside Number 10 Photo: Reuters

“We must assure that the market maintains competition and does noot return to the cozy oligopoly of years past,” he said.

The energy price cap is staying, he assured. “Its not going anywhere”.

“The UK is still too reliant on fossil fuels” he said, pointing to the importance of renewable energy sources, which he said had quadrupled since 2010.

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