Uncertainty over Gas Supplies this Winter
August 29, 2006 at 6:34 am
Confusion and uncertainty have arisen during the last week over the stability of the U.K.’s gas supply this winter. The debate hinges around the government’s opening of important new pipelines with Europe. As the UK becomes a net importer of gas (see previous blog), our supply is becoming increasingly dependant upon new pipelines, and fostering long-term ‘partnerships’ (DTI www.gnn.gov.uk) with European countries.
The last two winters have seen a marked shortage of gas that has helped fuel the massive price rises that consumers have been experiencing. However, it was hoped that new European pipelines would help alleviate the problem this year. Last week the chairman of Ofgem, Sir John Mogg, said that he was ‘confident’ that the new pipelines would lead to stability and security of gas supplies this winter, and that this could in turn lead to lower prices for the consumer.
However the Energy Minister, Malcolm Wicks, himself doubts the reliability of the new pipelines to ensure that prices stay low. He argued that the pipelines would only balance the negative effects of increasing demand and ever dwindling domestic supply if we hit a cold patch this winter.
British Gas have also raised doubts about Ofgem’s confidence, highlighting a worry that the pipelines do not necessarily guarantee a supply for the U.K., as previously European countries have prioritised their own supplies, despite the possibility of experiencing higher prices in the U.K.
The director of the Energy Intensive Users Group, Jeremy Nicholson, also expressed concern over premature optimism. He told the BBC that although the new pipelines were being put in place, ‘no-one knows how much gas has been contracted to move through them’, and that any delays in construction or an extraordinarily long cold snap could prove problematic, and result in shortages.
Gas Prices to Rise for Second Time this Year.
August 14, 2006 at 4:56 am
British Gas has announced that it will be increasing the price of its gas for the second time this year. Due to escalating wholesale prices, a 12.4% rise will be inflicted upon its 10.7 million gas customers.
Every increase in fuel prices forces tens of thousands of UK consumers into fuel poverty. With already a million pensioners in a state of fuel poverty, it is the elderly who will be worst affected.
However, UK business and industry will also be hit hard. As their overheads soar, their ability to compete with cheaper imports is being corroded, inevitably leading to a need to cut costs. It is most likely that this will take the form of job cuts, or shifting production overseas, where their competitors pay as much as 35% less for fuel.
The root cause of the problem is diminishing North Sea gas supplies. This has lead to an increased need to import from Europe, where gas prices are tied to oil prices, which are currently extremely high. Import storage capacity in the UK is low and resultantly, the deficit in supply cannot be offset.
Energywatch is pressing for the government to prioritise improving the UK’s storage capabilities. The Department of Trade and Industry is encouraging consumers to take advantage of our very competitive market and shop around for the best deals from suppliers.
For information and advice on switching your gas supplier visit www.energywatch.org.uk.
