Economists have warned that high natural gas prices will hold good for next year and the UK is in the grip of a global boom.
Energy analysts and economists believe natural gas prices have risen five-fold amid a “perfect storm” of cost pressures, with higher prices likely to persist until at least the spring of next year.
Gas stores across Europe have also been below average for the past five years, according to economists at Oxford Economics, and there is little sign that Russia or the US will make up for the shortfall in harsh winters. Reserves stand at 72 per cent, well below the five-year average of 88 per cent. The problem was made worse by North Sea gas producers’ production problems, “hindering timely recharge for the winter season”.
Energy regulator Offgame said the bill would rise to at least £139 for about 15 million homes as it pushes the industry’s energy price cap higher. Three energy suppliers collapsed this week, after several others in recent weeks, in the face of record gas prices. Price limits limit the amount that suppliers can charge consumers.
With coal prices rising by 78 percent and the gap between mining activities and higher exports by China, the gap left by the gas shortage is unlikely to be filled.
China is also facing an energy crisis of its own, with data from the Caixin Purchasing Managers’ Index survey showing activity amid restrictions on energy use in the world’s second-largest economy. There have also been reports of blackouts in the Northeast of the country in the recent past.
Other major economies like India, which are heavily dependent on coal, are also facing low inventories of fossil fuels.
“There has been an absolutely perfect storm of factors driving this extreme price growth, and because they are structural in nature and cannot be fixed overnight,” economists said in a briefing note, “we expect gas to be released by spring.” Prices will remain high. 2022.”
Economists said the energy supply problems are global, but the UK is more vulnerable than other countries.
“In the UK, the problem is even more dire,” he warned. There was a “severely under-investment in storage capacity” over the years.
To make matters worse, the UK is more dependent on natural gas for electricity generation than its EU neighbours, the Oxford Economics briefing said. This dependence accounted for 40 percent of energy production, compared to 17 percent in Germany and 7 percent in France.
The Rough Site, owned by Centrica, the UK’s largest gas storage facility, was closed in 2017. Net imports of gas into the UK more than doubled in the three months to June compared with the same period in 2020, and exports fell by more than three. -quarters (76 percent) during the same three-month stretch.
The US does not have the capacity to send as much liquefied natural gas to its terminals as is demanded from Asia and Europe, and severe weather events have also disrupted production at US sites. Russia has also faced challenges from 2020 disruptions in its gas production, suggesting it may not have enough capacity to boost supplies to Europe.
“One of the consequences of this price increase will be an emphasis on the real-world cost of decarbonization as a result of further shifting the balance in favor of expanding natural gas capacity, especially within the realm of LNG,” the economists said. He said countries, “particularly” the UK, would need “more investment in natural gas storage sites”.
A UK government spokesman said last week in response to criticism of gas storage shortages: “The UK benefits from having a diverse range of gas supply sources and we have enough capacity to meet demand. Let’s not expect a supply emergency.”
Credit: www.independent.co.uk /