Energy crisis: Why gas prices have skyrocketed and left the UK facing the prospect of food shortages | Economic news


The price of gas has skyrocketed in recent weeks, bankrupting several energy suppliers and prompting warnings of food shortages in UK supermarkets.

Wholesale gas prices have skyrocketed 250% since the start of the year, including an increase of 70% since August, according to the professional body Oil & Gas UK.

So why is this happening and how is it disrupting the country’s food supply?

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Wholesale gas prices have climbed 250% since January

How dependent is the UK on gas?

The gas market is crucial for the UK’s energy supply because of its role in heating, industry and power generation.

More than 22 million homes are connected to the gas network, according to the British government.

In 2020, 38% of the country’s gas demand was used for home heating, 29% for electricity production and 11% for industrial and commercial use.

So why have wholesale gas prices increased?

One of the main reasons is a “surge” in global gas demand as economies reopen after COVID shutdowns, according to the government.

He says that, combined with a cold winter in 2020-21 which resulted in higher demand, has led to a “much tighter gas market with less available capacity.”

Speaking on a visit to New York, Prime Minister Boris Johnson admitted there were “a lot of short-term problems” caused by gas supply shortages, but added: “It ‘ is really a function of the global economy waking up after COVID.

“It will get better as the market begins to recover, as the global economy recovers.”

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Patron of energy: this is the “crucial moment” for many small suppliers

Russia accused of acting to drive up gas prices

The European Commission has been asked to investigate the role of Russian gas company Gazprom in soaring gas prices across the continent.

A group of 40 MEPs said the company’s behavior led them to suspect market manipulation to push up gas prices.

In a letter, MEPs said they were wary of Gazprom’s “efforts to pressure” Europe to agree to a swift launch of its Nord Stream 2 gas pipeline, which still has to overcome regulatory hurdles that could take months.

Workers on the construction site of the Nord Stream 2 gas pipeline
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Workers on the construction site of the Nord Stream 2 gas pipeline

MEPs cited incidents including recent shutdowns of part of Gazprom’s production and said the company had refused to reserve gas transmission capacity through existing pipelines.

“All of these factors suggest that the record spike in natural gas prices in Europe in recent weeks could be the direct result of the deliberate manipulation of the market by Gazprom,” the letter said.

In response to the accusations, Gazprom said it supplied its customers with gas in full compliance with existing contracts.

The European Commission said it had received the letter and would respond to it in due course.

Wind power in UK hit by quieter weather

The calm weather over the past two weeks has reduced output from the UK’s 11,000 wind turbines, which account for more than 20% of electricity production, according to Bloomberg.

This means that the demand for natural gas to generate electricity has increased and Britain has turned to coal-fired power stations to fill the energy gap.

UK aims to become a leading supplier of wind energy
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Calm weather has reduced UK wind power in recent weeks

Are there other reasons for the rise in gas prices?

Other factors include the strong demand in Asia for liquefied natural gas, which means that less than expected has reached Europe.

In the UK, several gas platforms in the North Sea have also closed for maintenance which was interrupted during the pandemic.

Meanwhile, cables that import electricity from France were damaged last week in a fire.

The National Grid said its Sellindge site in Kent was evacuated after the fire on Wednesday morning.

The fire and planned maintenance mean it will be offline until September 25, and only half of its two gigawatt capacity will be available until March 2022.

A fire broke out at the National Grid site in Sellindge, Kent
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A fire broke out at the National Grid site in Sellindge, Kent

Why have food suppliers been affected?

The sharp rise in gas prices has resulted in the closure of two large fertilizer factories in Teesside and Cheshire, which produce carbon dioxide (CO2) as a by-product, which has affected the supply of the food industry.

CO2 is used in the humane slaughter of livestock and to extend the shelf life of products. It is also vital for cooling systems for refrigeration purposes, industry executives said.

Producers have warned that supplies of meat, poultry and soft drinks could all be affected due to the CO2 shortage.

Nick Allen, chief executive of the British Meat Processors Association, said the country could be two weeks away from the disappearance of British meat from supermarket shelves.

An empty freezer section in a Sainsbury's supermarket in Durham
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An empty freezer section in a Sainsbury’s supermarket in Durham

He told Sky News: “The meat industry, especially the pork and poultry industry, uses CO2 for humane slaughter. Eighty percent of pigs and poultry are slaughtered according to this process.

“CO2 is a by-product of fertilizers. These factories have closed and they represent about 60% of the CO2 produced in this country.

Mr Allen said meat manufacturers have said they have between five and 15 days of supply left.

He added: “Then they will have to stop. This means the animals will have to stay on the farms. It will cause huge animal welfare problems for farmers and UK pork and poultry will not be marketed. We are in two weeks before we saw any real impact on the shelves. “

CO2 is used in the humane slaughter of livestock
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CO2 is used in the humane slaughter of livestock

Ranjit Singh Boparan, owner of Bernard Matthews and 2 Sisters Food Group, said supply issues, along with a shortage of workers, will affect the supply of turkeys for Christmas.

He said the supply of turkeys was “already in jeopardy” as he needed to find 1,000 more workers to process the supplies.

“Now, without a CO2 supply, Christmas will be canceled,” he added.

“The CO2 problem is a huge blow to the body and puts us at breaking point, it really is – it’s poultry, beef, pork, as well as the food industry at large.”

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