insiderblmA surge in gas prices has seen UK energy suppliers go broke and the prospect of rising household bills.
It’s prompted headlines warning of shortages and a “winter of discontent”.
Does the UK face a gas shortage this winter?
Energy Secretary Kwasi Kwarteng said it was alarmist and misguided to start talking about gas shortages.
“There is no question of the lights going out, of people being unable to heat their homes. There will be no three-day working week, or a throwback to the 1970s,” he said.
The government said the UK has a “diverse and secure” range of suppliers. Norway in particular is increasing its exports from October.
However, demand for gas is rising across Europe, and some fear the UK could be physically – and perhaps politically – at the back of the queue.
What’s more, the UK has scant storage facilities – it’s been increasingly operating a “just-in-time model”.
The government stresses it’s “not complacent”.
And, if needed, it does have the power to impose emergency measures, such as ordering big industrial customers to temporarily stop using gas.
But the biggest factor – the weather – is beyond its control. Our best hope for avoiding problems is a mild, if breezy – and wind power-friendly – winter.
Where does UK gas come from?
The UK has been a big producer of gas since the mid-1960s – but output has fallen since 2000 and usage continues to rise.
We now import more than half our gas – much of it from Norway, and a considerable amount from the Netherlands and Belgium.
Liquid natural gas (LNG), transported by ship from the likes of Qatar, has increasingly been in demand in the UK, but there’s competition for supplies from the likes of China.
Russia been accused of restricting supply for political reasons (it wants to build a controversial pipeline across the Baltic sea). But this would probably not have a big effect on the UK as it supplies less than 5% of our gas.
Why is there a gas shortage?
A perfect energy storm has been brewing during 2021.
A cold winter around the world last year sent gas demand rising, depleting stores.
Those reserves would normally be replenished over the summer. But output dropped because many major producers were catching up with maintenance postponed during lockdowns.
Meanwhile, calm weather reduced the amount of electricity generated by wind power.
As a result, wholesale gas prices have more than quadrupled over the last year.
The UK has been badly hit because it’s one of Europe’s biggest users of natural gas – 85% of homes use gas central heating, and it also generates a third of our electricity.
What about my bills?
Even without a big freeze, bills are heading up. October’s increase in the fuel cap – the maximum customers can be charged – will mean many annual household fuel bills rising by £135 or more.
Most big domestic suppliers buy their gas months in advance – so they have yet to pass on the price rises of the past few months.
As they are scarcely making a profit on gas, it’s likely the energy “cap” will rise again in April.
There could be relief if the the squeeze on gas supplies eases. But economists say wholesale prices are unlikely to drop before storage facilities fill up again – and that’s not likely until spring.
Are gas prices rising in Europe?
The rise in gas prices has had an impact across Europe.
Italy and Spain have been badly affected as they rely heavily on gas imports. Their governments have cut prices and raised taxes on energy companies’ profits respectively.
The UK’s price cap has meant gas bills have been lower than the European average.
But this rise in prices comes on top of other economic problems such as labour shortages and increasing food prices, adding up to an unwelcome rise in the cost of living.
For this winter, stocking up on jumpers may be the cheapest option.
