Gas shortage to push up bills
‘Perfect storm’ of energy problems could make fuel more expensive for rest of the winter
HOUSEHOLDS and motorists were last night warned to expect sharp rises in gas bills and petrol prices after a “perfect storm” of supply problems as the winter freeze begins.
The shutdown of the North Sea’s most important oil and gas pipeline system on Monday was compounded by an explosion at a major processing facility in Austria, which is the main point of entry for Russian gas into Europe.
After the incidents, wholesale gas prices hit their highest level for six years, rising by more than 50 per cent in the space of 24 hours, raising fears that the increase will be passed on to customers.
Oil prices have climbed so steeply that motoring organisations are warning of a 3p per litre increase at the pumps by Christmas.
MPS have told energy companies that any rise in bills for consumers would be a “disgrace” because wholesale prices are agreed well in advance.
Ian Liddell-grainger, the Conservative MP and member of the parliamentary business and energy select committee, said: “Passing on price rises to the consumer would be totally unfair because it’s not their fault and this is nothing to do with them.
“The big energy companies buy their gas and oil about six months in advance, so there should be no need to increase bills.
“They should continue to honour their commitments to consumers. If they pass this on to their customers, it would be a disgrace.”
As well as problems affecting the Forties pipeline in Aberdeenshire and the Baumgarten facility in Austria, a series of smaller setbacks also added to the sense of crisis.
One of the largest North Sea sites is struggling to produce gas at its normal rate. The ageing Morecambe field is supplying at only around two million cubic metres (mcm) per day, less than half its usual rate of 5mcm.
Yesterday, BBL, the Dutch company that operates the gas pipeline between the Netherlands and the UK, had to restrict supply temporarily across the Channel because of problems with a compression station.
Meanwhile, Norway’s giant energy company Statoil said that it reduced output from its platform in Troll, Europe’s biggest offshore gas field, because of a power outage.
Norway is one of the main suppliers of gas to the UK.
The current cold snap has driven gas demand in homes and businesses to their highest forecast levels since early 2013.
Overnight on Monday and early yesterday, temperatures dropped to as low as 8.6F (-13C) near Shrewsbury, in Shropshire.
Demand for gas has also been driven steadily higher in recent years by the shutdown of coal plants.
The events have pushed gas prices to their highest level for six years, from just 57p a unit before the shutdown of the Forties pipeline on Monday to more than 90p yesterday.
Oliver Sanderson, a Thomson Reuters analyst, warned that the “spectacular” confluence of problems could
result in high prices for the rest of the winter. “This isn’t just about where we’ll find the gas we need for today – it’s about where to find the gas we’ll need in January,” Mr Sanderson told The Daily Telegraph.
“If small suppliers haven’t bought energy in advance, and that is possible due to the sudden start of cold weather in the last few weeks, they could be in trouble,” he warned.
“The European gas market seems to be going through a perfect storm,” said Massimo Di-odoardo, an industry ana- lyst at Wood Mackenzie.
The wholesale gas price for January has already climbed by almost a third, sparking concern that energy suppliers will pass increased costs on to their customers by raising tariffs.
A winter of surging gas prices could even cause smaller suppliers to go bust if they burn through their cash while trying to buy enough gas to heat customers’ homes.
This week’s “perfect storm” of problems will raise questions about the UK’S energy security, said Malcolm Graham-wood, a veteran energy industry adviser.
He said the gas crunch is an “entirely predictable” result of the UK’S creaking infrastructure and Government’s bungling energy policy.
Mr Graham-wood blamed the Government for its “short-sighted and ridiculous” decision not to invest in new gas storage facilities. The 32-year-old Rough storage facility off the coast of Yorkshire was forced to shut earlier this year.