Natural gas prices have skyrocketed, putting pressure on manufacturers and households with high energy bills.
While the savings seemed to amount to some thing like normal, an energy crisisthat hit Britain, the rest of Europe and much of the world.
Natural gas, the main objective of this compression, is crucial for generating electricity, running factories and heating homes. It is also considered by some to be a transitional fuel away from highly polluting coal.
Natural gas prices have increased six-fold to record highs . The increase means the wholesale price of electricity has reached stratospheric levels, making headlines across Europe as consumers stricken by the pandemic are now hit by sharp increases in their bills of domestic energy. These high costs also undermine the economy of companies that manufacture fertilizers, steel, glass and other materials that require a lot of electricity.
Britain, whose electricity system relies heavily on gas, is taking some of the toughest hits, creating major headaches for Prime Minister Boris Johnson's government.
Mr. Johnson was once pressured into subsidizing a fertilizer plant and is under pressure to do more to prevent plant closings and job losses. He also brought in military drivers in an effort to alleviate a gasoline shortage, which caused lines at gas stations.
The gas peak is also making geopolitical waves. Russia, Europe's largest gas supplier, is accused of manipulating prices. The United States, in turn, has warned Moscow not to try to exploit the gas shortage for its own ends. Pinch could pave way for more exports of liquefied natural gas from drillingshale in the United States.
Here is an overview of the energy problems that are rocking Britain and Europe.
Why have natural gas prices soared so high?
The demand for Energy surged as the global economy woke up from closures caused by the pandemic. The sudden need for natural gas caught the energy industry by surprise and prices skyrocketed. The approach of winter, the main season of gas consumption, has further increased prices as countries in Asia, Europe and North America bid each other up to ensure that they have fuel to stay warm.
China, the world's largest gas importer, buys gas to power power plants and reduce carbon emissions. China's aggressive buying hijacksent gas from Europe at a time when deliveries from Russia, a key supplier, have been disappointing.
European countries are sourcing supplies normally in gas in summer, when prices are relatively cheap. Not this year. European storage levels are low, making the markets so jittery that there have been some of the craziest gas price swings traders have ever seen. Image The Nord Stream 2 pipeline installation in Lubmin, Germany. The Kremlin has suggested that the gas shortage could ease if the pipeline is quickly approved by European regulators. Credit ... Odd Andersen / Agence France-Presse - Images
Is it Russia's fault?
No . Many factors have contributed used. But markets are watching Europe's largest supplier very closely, and analysts say recent signals from Russia that it will keep tight control over gas flows to Europe have played an important role. in recent price spikes.
"A lot of these were triggered by things the Russians actually did," said Trevor Sikorski, gas manager at Energy Aspects, a research firm.
President Vladimir V. Putin from Russia is trying to use the crisis energy for its own purposes. Wednesday he declared that the gas crisis would attenuate as soon as European regulators approve Nord Stream 2, the gas pipeline that runs under water from Russia to Germany. Once operational, the pipeline will likely strengthen the hold of Gazprom, the Russian gas company, in European markets.
On the other hand, some analysts doubt that the problem would be solved as soon as the European Union and Germany approved the new pipeline. Russia is likely facing a crisis of its own, according to Henning Gloystein, director of Eurasia Group, a political studies firm. As part of an agreement with the Organization of the Petroleum Exporting Countries to strengthen markets during the pandemic, Russian companies have been ordered to reduce their oil production and, consequently, their production.gas was also reduced and took a long time to recover. Image Britain has largely phased out coal in power generation and built a large capacity in renewables, especially offshore wind. Credit ... Suzie Howell for Hfrance.fr
Why Britain is she in such bad shape?
Britain is paying a price for a comb tion of successes and failures. The country has to a large extent phased out coal for power generation and developed capacity for renewable energy, especially offshore wind.These measures reduce greenhouse gas emissions and help curb global warming.
But shuttering of coal-fired power stations while the gradual closure of The country 's aging nuclear power plants have made Britain dependent on gas for about 40 percent of the country ' s electricity, far more than any other fuel. (In France, by contrast, nuclear power plants provide around 70 percent of the electricity.) It didn't help that the breezes that power UK wind turbines, which generate around 20 percent of the electricity. of the country on average, have been exceptionally low in recent months. .
"This climate policy success is making a comeback ", a Mr Gloystein said.
Britain is not yet far enough in its clean energy transition to escape the sting increases in global gas prices.
"We don't really have enough renewables to really break through right now ", a said Martin Young, analyst at Investec, a securities firm. “Gas generally sets the price. Heavy UK taxes on carbon emissions also add to electricity costs, he said.
A fire that has knocked down a big cable bringing electricity from France added to misfortunes. And unlike other European countries, Britain has not invested in gas storage facilities, instead allowing a large such facility to shut down in 2017.
Are consumers getting relief?
Soaring wholesale prices electricity is passed on to homeowners, stretching budgets and forcing governments to intervene. In Spain, the government recently said it would use profits from wind and solar power generation to compensate consumers for high gas prices.
About 15 million UK households were recently hit by energy price hikes of around 12% under a government to cap big rate hikes. The capped rates are reviewed every sox months; the next review, in April, is likely to result in a larger jump.
Another problem faced by homeowners is that many power suppliers who offered their customers cheap deals have found themselves unable to meet their expectations. commitments at current prices. Many of these relatively small businesses have collapsed in recent weeks, and the accounts of their estimated 1.7 million customers are being auctioned off to stronger companies. No one will lose power to these business failures, but ultimately these customers will pay higher tariffs, and the companies that take the customers will be able to pass the additional expenses on to the billpayers.
Will companies get a bailout?
The undertakingsEnergy users are demanding that the UK government provide some sort of aid to help pay their skyrocketing bills, but it is still unclear how ministers will react.
UK Steel, a trading group, said monthly wholesale electricity prices jumped to 200 pounds ($ 273) per megawatt hour in September , roughly four times what the industry considers normal and almost double the wholesale price in Germany and France.
Having borrowed heavily to finance holidays and other programs to cushion the impact of the pandemic, the government is reluctant to spend more.
Recently, however, the government agreed to subsidize temporarily the operations of a fertilizer plant. The plant's parent company, CF Industries, had shut down the plant due to high energy costs, but the carbon dioxide it produced as a by-product was vital to the food industry.
E Government reportedly preparing to announce a low-interest loan scheme for the hardest hit companies, but that is unlikely to reassure executives, who are also calling for relief from UK carbon taxes.
Image Long gas lines in Britain last month were not due to a shortage of fuel, but to a short age of truck drivers delivering fuel. Credit ... Mary Turner for Hfrance.fr
Gasoline shortages? That's a different problem.
Long queues at stations- Service in Britain last month were caused not by a fuel shortage, but by a shortage of truck drivers to deliver the fuel. Partly because many European drivers returned from Britain due to Brexit , there are not enough of them to fill the gas station tanks.
The problem snowballed when the news from long queues at gas stations caused panic shopping.
In recent weeks the problem has disappeared .
Is this the new standard?
This could go on for a while, much like the supply chain problems that continue to hamper the delivery of goods. Company executives note that these price spikes occur in the fall , not in winter, when demand for gas increases, so they suspect the crisis could get worse. Much depends on the weather. A change in Russia's approach could help.
But analysts say Britain could be Europe's largest economy most at risk of not having enough energy to run its economy. "If If this were to happen, the government would likely require factories to cut back on production "in order to ensure household gas supplies, Mr. Gloystein wrote in a note to customers.