There is no gas prices rises crisis
If you read enough news it’s easy to develop the idea that everything is terrible and only getting worse. Predictions of doom from climate change are likely to be salted with a few tragic events, enough to short circuit rationality:
Yesterday X people were killed by floods in Place Y. Two weeks ago tornadoes swept across Place Z, causing catastrophic damage. This comes hot on the heels of an intense drought in Place A that has caused devastating food shortages. We are seeing the climate crisis deepen in real time, said Talking Ass B. The time for action is now. There is no longer any excuse for delay.
So I hesitate to use the present flood of bad news about energy as definitive evidence of an energy crisis. But still.
Previously I noted the Orwellian response to what was obviously a gas shortage, where high prices were blamed on over-reliance on gas instead. However, things have only got worse since then. When I wrote that note, the price of gas had come down from (what we hoped was the peak) £2.94 per therm down to about £2.34. On December 21 the price hit £4.52 per therm, though as I write it has fallen back to about £4. (The price a year ago was about £0.50 per therm.)
Here’s what I got today when searching “energy crisis” on Google:
And the front page of the FT (clipped from the BBC’s front pages item):
In case you can’t read the smudgy small print, it speaks of energy bills reaching £2000 per year. And that is clearly not a sensationalist publication talking: it’s the pink grapefruit itself, a paper only consumed by really rather serious types, including bunker-dwellers (see featured image).
Bloomberg said this, in between demands for money (my bold):
Cold-stricken Europe is drawing a flotilla of U.S. liquefied natural gas cargoes amid an energy crisis that has sent gas prices to record levels. Facing a winter shortage and little relief from the continent’s main supplier Russia, natural gas in Northwest Europe is trading for about $57.54 per million British thermal units, up almost a third from a week earlier. That’s roughly $24 higher than Asian prices and more than 14 times higher than gas being sold on U.S. benchmark Henry Hub.
What does our government have to say? Kwasi Kwarteng (Secretary of State for Business, Energy and Industrial Strategy) has retreated to his bunker, presumably clutching a fifty-year-old copy of the FT: the only recent mention of him I can find on a news search is a quite facile advertorial here:
Mr Kwarteng does not believe that the shift to net zero needs to result in higher prices for consumers. ‘No one is suggesting now that coal would be a cheaper way of generating power.’
No-one is allowed to suggest that, I believe. We can suggest it here, but Secretaries of State won’t hear us. That is more or less the same thing.
The success of wind and solar, however, has compromised investment in tidal power – a form of renewable energy where the outputs are more predictable than wind or solar, and which could add resilience to electricity networks. The government was put off investing in tidal power because of initial estimated costs of up to £200 per MWh, said Mr Kwarteng. But then little more than a decade ago wind power cost £150 per MWh. It now costs more like £40 per MWh, thanks to economies of scale.
If this presages a pivot into tidal, we’re all doomed. (Or is this the Spectator getting paid to publish something so idiotic that they are able to make some sort of ironic point?)
Actually, hold the phones. I’ve found another mention of the Secretary of State in recent news:
Kwarteng urged to use powers to adjust ‘out of date’ transmission charges
Aha, they want him to charge renewables for accessing the grid! Now we’re talking. Hang on, wait. No they don’t.
Concerns about transmission charging and its potential to act as a barrier to Scottish green energy projects have been a dime a dozen recently.
They want remote wind farms to have cheaper access to the grid. The obvious answer to an energy crisis, I’d say.
The system was drawn up 30 years ago with the aim of encouraging developers to build power plants near to where demand is at its greatest.
Yes, what we need is a new system encouraging developers to build power plants far away and run a giant extension lead out to them at our expense.
The BBC finally noticed the crisis here.
Emma Pinchbeck, head of trade body UKEnergy, said rising prices were now starting to hurt the economy. The government said it had measures to protect consumers, but she told the BBC tax cuts and green levies [sic] would help.
I think Pinchbeck here is referring to switching green levies from electricity to gas, which won’t help people with gas boilers (i.e. most of us). The BBC seems to think she is asking for more green levies. My view is that the green levies are one part of the problem and need to be excised altogether.
The BBC also asks the question,
Why are gas prices so high?
Their answer:
There has been a worldwide squeeze on gas and energy supplies.
As a result, wholesale energy prices rose sharply and, in recent weeks, have hit their highest levels of 2021.
Reasons include:
- A cold winter in Europe last year put pressure on supplies and, as a result, stored gas supplies were low
- A relatively windless summer meant it was difficult to replenish those supplies
- There’s been increased demand from Asia – especially China – for liquefied natural gas.
There are a number of technical and geopolitical issues at play as well, which means many countries across Europe are grappling with the same problems.
No mention there that the US’s natural gas costs a tenth as much as ours. Nor that LNG tankers are chugging across the Atlantic, their delighted owners having struck ludicrous deals to supply us with a fuel we are sitting on a massive stockpile of.
Let me suggest to the BBC that countries that are dependent on large imports of gas are the ones suffering in this crisis, while net exporters and self-sufficient countries are not. We were once in the latter group, now, thanks to government stupidity, green infestations in the Lamson tubes, etc, we are firmly in the former group.
CONCLUSION
We have a choice: we can either frack for our own gas, or keeping banging our heads against the wall hoping our headache will go away. I’m betting on the latter.
Featured image: A copy of the FT found in Burlington bunker, via the BBC. An archived version of a fascinating web page about the bunker is here.
Climate Scepticism 
JIT, thank you for so pithily exposing the stupidity of those in charge of energy policy.
The Guardian also recognises that there is an energy price crisis:
“Ministers under pressure to protect consumers from energy price crisis
Energy body pushes for multibillion pound plan to spread payments with bills predicted to rise by 50%”
https://www.theguardian.com/business/2021/dec/23/ministers-under-pressure-to-protect-consumers-from-energy-price-crisis
“Energy bosses are dialling up the pressure on ministers to shield consumers from soaring gas and electricity bills, with calls on the government to set up a multibillion-pound scheme to help spread the cost to households over a number of years.
Amid warnings that energy bills could rise by 50% next year, triggering a “national crisis”, suppliers such as EDF have called on the Treasury to follow other European countries by cutting VAT and green levies to bring down bills.”
Wow, calls to cut green levies to bring down bills! I never thought I’d even see those words in the Guardian. That’s as good as it gets, however. Needless to say, they come up with a weird, complicated scheme to “solve” the (self-inflicted) problem:
“One idea gaining traction within the industry, including at the trade body Energy UK, involves a government-administered scheme to smooth the impact across multiple years so that consumers aren’t hit all at once.
Under plans sketched out by energy suppliers, one or more commercial lenders – such as banks – would cover the immediate cost that they are incurring to buy energy on wholesale markets at record prices, with a sum of at least £7bn required. The loans would not require a government guarantee, but officials would be responsible for ensuring repayments.
Fans of the plan believe this could avert the need to pass on the huge increase in gas prices with an immediate hike in the energy price cap that limits what suppliers can charge bill payers. The cap is forecast to rise from £1,277 to nearly £2,000 in April without intervention.
With lenders shouldering the upfront cost of wholesale energy prices, suppliers would then be able to stagger tariff increases across multiple years, repaying the lenders through an industry-wide scheme overseen by the government. Ministers and officials are understood to be considering the proposal.
One industry chief executive told the Guardian this would avoid extra spending or loan guarantees from the Treasury.
“The mechanism could be funded by industry, the government would just need to make sure everyone paid back their part of it and that there were no free riders,” he said. “It just needs enforcement. We need to make sure we don’t slam households with all the costs in the single year.”…”
Great – we still have to pay loads of money for the crazy energy policy in place in this country, but we get to “smooth” the costs over a number of years. That’s a relief!
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The Belgian government seems to be as daft as ours:
“Belgium to part ways with nuclear plants
The Belgian government has reached an agreement which will see its nuclear power stations close by 2025, although the possibility of extending the life of two reactors remains open.”
https://www.rt.com/news/544223-belgium-government-nuclear-power/
“On Thursday, Belgium’s seven-party coalition hammered out an agreement on nuclear power. The deal, which was agreed just a week before the end-of-2021 deadline, will see all the country’s nuclear power plants close by 2025. Lawmakers made the accord after talks that went on throughout the night.
As part of the deal, there remains an option to extend the life of two of the country’s seven reactors. Prime Minister Alexander De Croo said it was possible that certain nuclear reactors could operate for longer, but he contended it was “very unlikely.”
The agreement brings to an end months of debate within the government, with the Greens demanding that a 2003 law setting out a nuclear exit be respected, and the liberals favoring extending the life of two of the country’s newest reactors.”
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And then there are the German politicians…
“Germany ditching nuclear power at worst possible time
Germany is on track to close nearly half of its nuclear reactors before the end of 2021. The shutdowns are set to place a huge burden on European power grids in the face of one of the worst energy crises ever.”
https://www.rt.com/business/543866-germany-nuclear-phaseout-energy-crisis/
That should help….
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An objective outsider might think that shutting the German nukes looked like the work of a 5th column. It is hard to believe that those responsible have reducing carbon dioxide emissions as their top policy priority.
If only we could dismantle them and reassemble them over here.
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The Secretary of State resurfaced to save the day, or something:
Kwarteng is apparently considering grants to the poor. The “demands” for a VAT cut are pretty hollow, since if the prices are going to rise 56%, even if you wipe VAT altogether, they’ll still rise by 48%. Meanwhile grants to the fuel poor are naught more than a sticking plaster.
https://www.telegraph.co.uk/business/2021/12/23/kwasi-kwarteng-plots-energy-rescue-package-amid-calls-vat-cut/
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The BBC ran this headline yesterday:
Energy bills to soar 50% unless government intervenes, industry warns
But the government *has* intervened, by preventing fracking.
You want more?
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Readable screengrab of that FT page
https://pbs.twimg.com/media/FHPhDCGXEAMF3k5?format=jpg&name=orig
The free article is archived : https://archive.fo/r2R4x
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Meanwhile:
“Energy prices: Government must show more urgency, says Ovo boss”
https://www.bbc.co.uk/news/uk-59797224
“The government is showing “nowhere near enough urgency” in finding a solution to steep increases in gas and electricity prices, one energy boss has told the BBC.
Ovo’s boss Stephen Fitzpatrick predicts the rise in wholesale gas prices and its impact on people will be “an enormous crisis for 2022”.
The business secretary will meet regulator Ofgem and energy firms later.
The government says it wants to make sure consumers are protected….
…The government is showing “nowhere near enough urgency” in finding a solution to steep increases in gas and electricity prices, one energy boss has told the BBC.
Ovo’s boss Stephen Fitzpatrick predicts the rise in wholesale gas prices and its impact on people will be “an enormous crisis for 2022″.
The business secretary will meet regulator Ofgem and energy firms later.
The government says it wants to make sure consumers are protected….”.
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Mark, I read that too and don’t understand it. To my thinking, which may be incorrect, it makes no sense to use the consequences of high inflation to create a subsidy. Then again, we’ve seen something similar with house prices, and that worked well. Harrumph.
(Maybe this works if energy use is inelastic? But if that was the case, what would be the point of smart meters?)
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The story Mark linked to has now been updated with a disgraceful comment from BEIS:
The Bloomberg quote above says that the price of gas in Europe is 14 times that in the US. This is not a global price crisis. BEIS is lying about an inconvenient fact, a lie that anyone could disprove with a 10 second search of the internet.
[Edit: in my fury I was even more incoherent than usual.]
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“Politicians should be ashamed of their opposition to fracking
While gas prices are soaring in Europe, in the US they have barely moved thanks to its shale sector”
https://www.telegraph.co.uk/business/2021/12/26/politicians-should-ashamed-opposition-fracking/
“Factories may have to close. Power may need to be rationed. And we may well have to make painful concessions to the Russian president Vladimir Putin on Ukraine simply to keep the lights on. Meanwhile, industrial conglomerates such as Sir Jim Ratcliffe’s Ineos, among the biggest manufacturing businesses the UK has left, are facing a huge financial hit. The whole of Europe, and Britain just as much as anywhere, is gripped by a worsening gas crisis with prices soaring by the day….”
Behind a paywall, unfortunately.
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“North Sea gas firms could pay windfall tax to help avoid energy crisis
Companies may be forced to hand over slice of record profits after UK gas prices increase ninefold”
https://www.theguardian.com/business/2021/dec/28/north-sea-gas-firms-could-pay-windfall-tax-to-help-avoid-energy-crisis
“North Sea gas producers could face a windfall tax on the near-record profits they are likely to make from booming prices, in an effort to help protect households from the soaring costs of the energy crisis.
The government faces growing pressure to take urgent action to prevent a national energy crisis that could double home energy bills to £2,000 a year, including a multi-billion pound raid on North Sea gas earnings….
…The UK’s North Sea oil and gas companies are expected to report near-record cashflows of almost $20bn (£14.9bn) for the current financial year, according to industry experts at Wood MacKenzie, after prices on the UK’s gas market climbed nine times higher in the last year….
…Wood Mackenzie said a windfall tax on the UK’s North Sea companies “cannot be ruled out”, particularly in light of the UK government’s ambiguity towards fossil fuel development within its 2050 net zero climate plan.
“There would be strong resistance from producers, who would typically stop investment in response. But if the government is already considering winding down the sector, this threat may not be as persuasive as it has been in the past,” the consultancy said….”.
And when the sector stops investing, and is wound down, what then? Talk about killing the goose that lays the golden egg. Are they determined to make us dependent on foreign countries and to make the next crisis even worse?
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From Net Zero Watch: “Declare an energy emergency or risk economic disaster, Boris Johnson warned”
Which is where they should always have been. Obviously a sensible call, but it’s unlikely to be heard, alas.
So the call is now to declare an energy emergency, in the wake of years of calls to demand a climate emergency… the response to the fake emergency having created a genuine emergency.
https://www.netzerowatch.com/declare-an-energy-emergency-or-risk-economic-disaster-boris-johnson-warned/
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Only when the s**t hits the fan will some wake up (maybe)
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“Energy costs and Covid pose ‘existential threat’ to UK’s small businesses
Crisis caused by record high energy prices is the ‘biggest concern’ for employers of 13m nationwide”
https://www.theguardian.com/business/2021/dec/30/energy-costs-and-covid-pose-existential-threat-to-uks-small-businesses
Despite the headline, it’s really energy costs that are the existential threat:
“Small businesses, which employ almost 13 million people in the UK, are expected to feel the brunt of crippling energy costs in the coming weeks as firms begin to strike new fixed-term deals amid record high energy market prices across Europe.
The UK’s micro businesses, which employ fewer than 10 people each but a total of 4.2 million employees across the country, are “in trouble” due to the national energy crisis ignited by record energy market prices, according to a warning from the Federation of Small Businesses (FSB).”
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https://tradingeconomics.com/commodity/eu-natural-gas
We’re back to under 2 quid a therm, mid-November prices – thanks to the flotilla of US supply ships. (No historical precedent there.) And there was a bit of help from the weather. A silver lining to the climate change cloud? Warmer winters and less reliance on heating? Presumably a cold snap could see the price swing the other way. However, I can’t help but think that when we’re reliant on the weather for actual electricity, not just *demand* for energy, we’re gonna be seeing even more volatility than at present.
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