Why are UK gas prices so high and could they affect the US?

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A photo illustration shows gas burning on a domestic hob in Liverpool, north west England on September 20, 2021.

Photo: Paul Ellis (Getty Images)

The European energy market has fallen into chaos. A gas shortage has driven prices to shocking highs with ripple effects on everything from electricity to meat production.

The UK has been particularly hard hit. Nationally, average energy prices over the past month have been almost three times higher than any other month in September in the past 10 years, the average household waiting pay almost $ 190 more this year. Energy bills are expected to rise even more sharply after Friday, when a price cap on bills is set to go up.

These exorbitant electricity prices are causing concern on potential power outages this winter, which could drive up energy prices and force more businesses to close. The crisis shows the dangers of over-reliance on gas in the future.

Why are gas prices so high?

The drivers of this crisis are complex, but the key factor is the international price of fossil gas, the energy source on which the UK is most dependent. More than a third of UK households have gas stoves and 86% rely on them for heating. Gas also represents 42% of the country’s electricity production.

“The fundamental problem, the underlying problem, is really the overreliance on gas,” said Tara Connolly, senior campaigner on EU gas at Global Witness.

The problems started last winter, when uncharacteristically low temperatures stuck around through March. Due to the cold, countries across the northern hemisphere ran through their gas reserves at a fast clip. At the same time, countries began to emerge from covid-19 lockdowns, creating more demand for energy and sending fossil gas prices skyward.

Some European gas stores would normally have been replenished by Russia, but in recent years, the nation has been increased shipments of gas to China while reducing its supply to Europe. A drought in Brazil lowering of hydropower power generation, which also increases the demand for gas-fired electricity.

Other forms of energy have failed to fill the void. Nuclear power plants are down for maintenance, a major cable used to import electricity from France caught fire and was taken offline, and the production of wind turbines declined in the middle of the was the least windy since 1961.

“It’s really a lot of different types of factors, all happening at the same time,” said Euan Graham, senior researcher at think tank Third Generation Environmentalism.

What are the effects?

The crackle force British factories closed. Several fertilizer factories have announcement they are stop operations due to the high price of gas. Industrial carbon dioxide, which is produced as a by-product of fertilizers, is now scarce. Therefore, soda producers are in trouble. So is the meat industry, which uses carbon dioxide to stun animals before they are slaughtered.

“We’re two weeks away from seeing real impacts on the shelves,” Nick Allen, head of the British Meat Processors Association, told Sky News last month.

Almost everyone in the UK is affected by the energy crisis, but the low-income people who need electricity the most are feeling the worst effects.

“Worst of all are the elderly and the disabled, who suffer more from the cold, need more heat and have the fewest resources to pay the bills,” said Ruth London of the Fuel Poverty Action campaign group, in an email.

Social housing also tends to be poorly insulated, making it even more expensive to heat. To make matters worse, this rise in utility bills coincides with a fuel shortage due to a lack of truck drivers, which is driving up the price of gasoline. It also comes just before a $ 27 reduction per week in universal credit, the UK’s welfare system serving 6 million families.

“We’re going to see these things dramatically increase the basic cost of living for the poorest people in the income sector,” said Adrienne Buller, London-based senior researcher focused on Green New Deal policy at the group. Common reflection. Richness.

How the UK can solve its gas crisis?

This energy crisis, like others before it, shows that excessive dependence on gas is a recipe for disaster. But there are ways for the UK to improve energy reliability while decarbonizing the industry.

“First and foremost, the UK needs to take energy efficiency seriously,” Graham said. Efficiency and weatherization of homes would reduce demand and save people money on their energy bills.

Another urgent step, Graham said, is to move away from gas boilers, on which the vast majority of UK homes depend for heating.

“These technologies are ready to go and they are really urgently needed to meet the UK’s climate goals,” Graham said.

The UK has a long way to go on both fronts as it moves in the wrong direction. In March, the Boris Johnson administration killed a grant for green houses, which allocated funds to increase energy efficiency and install heat pumps, just six months after its launch. A Greenpeace study released earlier this month also found that the UK is lagging behind other European countries in the heat pump installation. Not really inspiring for a country hosting the United Nations climate conference next month.

The nation must also invest heavily in renewable energies. But Connolly said it had to be done with intention.

“It’s not just about building more renewable energy and everything will be fine. It’s really about thinking about all the technological solutions that must be built around renewable energies, ”she said.

This includes on a large scale battery storage and interconnectors to transmit energy from one place to another. It also means ensuring that clean energy sources like wind and solar are distributed.

“It’s not like the wind never blows somewhere in Europe, ”she said.

However, these changes will not happen overnight. With residents facing a pinch, Connolly said the UK government should take action to help them cope with high bills such as tax breaks and welfare programs, especially low-income households.

Could High gas prices affect the United States?

The UK has been hit particularly hard by the energy crisis because it is so heavily dependent on gas and lack of facilities to store it. But the effects of high gas prices have been felt all over the world.

“The first place that was affected by this gas crisis was actually Spain and Portugal,” Connolly said. In both countries, average wholesale electricity prices are triple the level they were six months ago.

China is also feel the heat. The, millions of people have seen power outages, businesses are shutting down due to rising utility bills, and some workers have been hospitalized with carbon monoxide poisoning after ventilation systems power loss.

While the impacts are currently not as visible in the United States, high prices could still wreak havoc. This winter, the cost of home heating could increase dramatically. Half of the country’s households use gas for heating. If cold temperatures arrive early this winter, it could wear the country down already below-average inventory levels and further inflate the prices.

“If we get an early frost it could get ugly. It could get ugly quickly, ”Robert Yawger, director of energy futures at Mizuho Securities, Recount CNN Affairs.

Americans are already grappling with high prices for other commodities due to inflation, and high energy prices could hit people’s pockets even more.

“I don’t think the United States is immune to worrying about these volatile global gas prices,” Connolly said. “The gas crisis happening in Europe is a warning.”

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