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Energy Rationing Fears grow due to low UK gas reserves and Russian opportunism

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Matthew Olney's picture
Content Manager Dyball Associates

Content Manager for Dyball Associates who writes and creates articles on the latest Energy News, top tips, infographics and videos.

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  • Sep 7, 2021 10:45 am GMT
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With record high wholesale energy prices and numerous other issues to contend with, energy suppliers won’t be happy to hear the increasing warnings over a potential shortage in gas supplies this winter as fears mount that Russia could engineer an energy supply crisis.

gas pipeline

Why the concerns?

Britain and Russia aren’t exactly on the best of terms politically, only in June this year the two nations clashed after an incident between the Royal Navy warship HMS Defender and Russian fighter jets in the Black Sea.

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Russia has been stepping up its presence on the world stage and with the recent humiliation of the USA and western nations in Afghanistan, Russian President Vladimir Putin may think the coming winter will be a good time to put pressure on Europe.

Europe has long been exposed to energy shortages due to its reliance on Russian gas pipelines, an issue that has long been warned about, but little action taken.

If relations decline further or another incident occurs, then experts are worried that Russia could deliberately orchestrate an energy supply crisis by restricting the amount of gas it sends to the continent.

 

HMS Defender

Why is the UK at risk?

The UK is massively reliant on gas and is exposed to any such restrictions Russia may impose on Europe.

UK gas reserves are already at very low levels due to a combination of cost-saving, a harsh 2020 winter and a surge in demand around the globe as economies reopen following the ending of Covid-19 lockdowns.

This perfect storm has left the country relying on importing energy from Europe via gas and electricity interconnectors.

According to a new report released by Oil and Gas UK, imports of gas hit a new record high in 2021 with 56% of the gas imported being used to power homes and run power stations.

Despite all the talk of going ‘green’ the UK is now one of the biggest consumers of gas in Europe, with 85% of all homes reliant on it to heat their homes and water. 35% is used by businesses and for electricity generation.

Another finding of the report is that, overall, the UK still gets 73% of its total energy from gas and oil with the bulk of it coming from production on the UK Continental shelf.

“The UK is more vulnerable to a gas supply crisis than other Western European countries. It has way too little storage and it is buying more Russian gas than it realises through the Netherlands,” said Marco Alverà, chief executive of the Italian pipeline and infrastructure group SNAM.

Record high gas prices to make for a grim winter for many

Most energy suppliers have been forced to hike their prices, with some already making two or three rises before the winter begins.

Gas prices have surged due to the combination of geopolitical factors with British futures contracts for November hitting a record high of 135 pence per therm last week, a figure that is three times higher than normal.

The high gas prices have prompted Centrica, owner of British Gas to warn that energy-intensive businesses in the UK could be forced to curb their activity this winter for demand to be achieved.

If the winter is particularly brutal many businesses may have to shutter temporarily to ensure that domestic customers have enough supply to stay warm. Gas providers have been unable to replenish supplies during the summer as demand and competition from Asia snapped up supply.

“We haven’t seen a price situation like this before. If you can’t attract supply the only alternative is to cut demand to balance the market. If we do see a supply crunch this winter the other way to balance the market is through economic activity. If prices are really high then some gas-dependent businesses in the UK and Europe may simply decide to not produce,” said Cassim Mangerah, an energy trader at Centrica in an interview with the Financial Times.

Whatever happens, energy suppliers need to be ready for a challenging winter and do what they can to support their customers and the most vulnerable.

Looking to enter the UK energy market? Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence. 

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Bob Meinetz's picture
Bob Meinetz on Sep 7, 2021

Matthew, if analysts at Centrica "haven’t seen a price situation like this before", they either aren't old enough or haven't been paying attention.

In 1973 OPEC pulled exactly the same stunt, but with oil. France was in worse shape than England is today - all of its electricity plants were powered by burning oil. So it would never be dependent on another country for electricity again, PM Pierre Messmer ordered the French national electricity company, Électricité de France, to embark on a massive program to generate all of the country's electricity with nuclear power. Within 12 years, France had not only gained electricity independence over OPEC, it had the cleanest power of any country in the world.

It's a matter of time before Russia withholds gas from Germany as they are from the UK now, and I can't think of any two countries in the world who need to learn France's hard lesson more. The lesson? That intermittent, unreliable "renewable" energy often requires fossil fuel power to come rushing to its aid; that when it isn't available, lights go out. Businesses close, computers go dark, economies shut down.

Rabid anti-nuclear activists in the UK will soon discover they aren't able to spread their message of irrational fear by social media or email anymore, and those who take to the streets with megaphones will soon discover no one is listening.

Jake Maruschok's picture
Jake Maruschok on Sep 8, 2021

Very interesting indeed. You would think with Brexit, the UK would have opened conversations with the US or Canada to supply supplemental natural gas instead of relying on Russia. 

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