British Government Preparing for 'Worst-Case Scenario' of Gas Prices, Says MP

© REUTERS / POOL / Boris Johnson at British Gas training academyBoris Johnson gestures during a visit to a British Gas training academy in Leicestershire
Boris Johnson gestures during a visit to a British Gas training academy in Leicestershire - Sputnik International, 1920, 23.09.2021
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According to the Oil and Gas UK trade association, the wholesale prices saw a 70 percent spike in August and have seen a 250 percent rise since the beginning 2021. The pricing crisis has hit all of Europe, but Britain has apparently been the worst-affected nation, with reports saying the situation may have a domino effect on other UK industries.
British authorities are bracing for a "worst-case scenario" of gas costs, said Paul Scully, MP for Sutton and Cheam. Speaking on Sky News, the lawmaker said the government of Boris Johnson is preparing for a situation when prices remain high for the long-term. He didn’t elaborate on how long the period may last, noting that the authorities have been “far too complacent” about the crisis.

Scully said the wholesale gas costs have also put pressure on the country's energy price cap – the maximum price that energy suppliers are allowed to charge customers. It is set by UK regulator the Office of Gas and Electricity Markets (Ofgem). According to local media, the price cap is to increase starting from 1 October to £1,277 (US $1,751). This is the price an average household will be charged per year.

Paul Scully’s remark about the ongoing crisis appears to contradict one made by Prime Minister Boris Johnson, who earlier this week argued that the issue is a "short-term problem".

"The market is going to start fixing it, but in the meantime the government will do everything we can to help people, to help fix it, to make sure that we smooth things over", Johnson said.

Reasons for Spike in Prices and Potential Domino Effect

As mentioned earlier, the pricing crisis has affected all European nations as well as countries in Asia, but Britain has reportedly been the worst-affected nation. Experts highlight several factors that have contributed to the problem.
the cold winter last year put pressure on supplies, which subsequently led to growing demand;
competition for liquefied natural gas supplies between Europe and Asia;
a significant drop in supplies of renewable energy due to a windless summer;
a recent fire at a plant in the UK damaged a power cable supplying electricity from France to the UK;
Since 1986, the responsibility of supplying gas and electricity to citizens lies in the hands of private companies and not the government. The energy price cap seems to be a double-edged sword – on the one hand, it protects the public from sudden price hikes, but on the other, the brunt of the crisis is borne solely by private companies, which are unable to pass price increases to consumers.

This has already taken a toll on the UK’s energy suppliers. According to local media, there were 70 such companies in the United Kingdom at the beginning of this year. Now there are only 30, and experts predict less than 10 will be left by the end of this year. The government is now holding talks on providing emergency loans to energy suppliers amid the ongoing crisis.

The situation has already had an impact on other industries in Britain. Two large fertilizer plants, which produce CO2 (a gas used in the food industry to extend the shelf life of products) have suspended their operations due to spike in gas prices. Producers have warned that the shortage of CO2 could lead to a shortage of food supplies.

Food producer Bernard Matthews went as far as to suggest that Brits should brace themselves for the cancellation of Christmas. Prime Minister Boris Johnson, however, has downplayed the reports of food shortages and noted that the country’s supply chains are "very secure".
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