Rising UK gas prices

Just when you thought it was safe to come out from under the duvet, news reaches us of yet more potential rises in gas prices.  This, of course, is not welcome festive news for the thousands of companies who need to factor business energy usage into their bottom line.  Well, here at Business Gas.com, we might not be able to get you an Xmas card in time; however, we will always do what we can to reduce the impact of such rises by scouring the market for the best energy deal for you and your business.

rising gas pricesHere’s the latest problem: think back to the tail end of last winter, to March 2013, when we thought the worst of the weather was over.  Well, rather like Australia’s confident batting display, it turned out the tail end could pack a mighty punch.  I personally found myself in what was called a ‘once in a thousand year’ storm on the Western Isles of Scotland, witnessing collapsed power lines and stranded cattle.  That extreme weather led to the shutdown of two main UK pipelines.  And in an unfortunate game of economy dominos, that had the consequent effect of doubling gas prices.

Things have, of course, settled back down since then, but now we find the winter of 2013-2014 fast approaches.   And the issue now is a lack of storage, leaving the UK vulnerable, especially if supply is disrupted by now macro-economically crucial countries such as Russia.  Here in Britain we store our gas in huge tanks, but Germany has five times our capacity.  Put simply, Germany has 70 days of gas reserves, should supply dry up.  The UK has 13.  If we experience another savage winter or sudden cold snap, and supplies again diminish and run low, the economic pressures of supply and demand would entail that the cost of gas would soar.

Buying gas the smart way

Specialist companies purchase gas when it’s cheaper, in the summer months, and the release it over the winter months, in an attempt to confront these price fluctuations.  However, the Government has now refused to provide the funding to support the storage of more gas.  It’s that key decision that now leaves UK businesses vulnerable to these price rises.  One company, for instance, had devised a rather innovative plan to store gas in caves under the Irish Sea.  Rather like an enormous, countrywide version of the domestic storage heater, the idea would be to store the energy supply as an insurance policy, and release it as and when needed, helping to dampen price fluctuations.

Such a scheme might save consumers an estimated £1 billion, over 10 years.  However… 10 years is a long time in politics, and the scheme has come unstuck because of the more immediate pressure it would place on energy bills, in this current climate of rising energy bills.  To encourage such investment, the scheme would have to be backed by Government subsidies.  That subsidy would have to be distributed across everyone’s bills and that, the Government feels, would not wash within this on-going price rise debate.

So, a long-term benefit loses out to short-term political point scoring.  Following the decision, three similar storage plans have now been dropped and alongside the immediate possibility of rising gas prices, the long-term stability of the UK’s energy provision is also threatened.  On the one hand we have rising demand; on the other, diminishing North Sea reserves.  If storage is also low, the UK might well face an uncertain future of energy supply.  We will continue to monitor developments.

 

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