Soaring gas prices cause concern in UK

Providers shut down in race for supplies

The British government has held emergency talks with energy company chiefs as concern grows over the spiraling price of gas, and the knock-on effects for consumers and industry at large.

According to industry group Oil & Gas UK, wholesale prices have increased by 250 percent since the start of the year, and 70 percent since August alone, with the finger of blame being pointed at increased demand and reduced supply.

A government cap on energy prices means consumers are protected from suppliers passing on excessive increases, but this has led to the United Kingdom's crowded energy supply market being laid waste.

The BBC reports that at the start of the year there were 70 energy supply companies in the UK, but numerous smaller suppliers have stopped trading, and now the sixth largest, Bulb, is the latest to be seeking an emergency bailout from the government. By the end of the year, it is feared that the number of suppliers trading could be down to 10, which would mean many consumers having to find new contracts.

Although energy watchdog Ofgem will ensure that, in the event of a company ceasing trading, customers do not lose supply or any money they have built up in credit with their old suppliers, there is a fear people could be forced onto more expensive tariffs than the one they chose, just as the country enters a time of year when the changing of the seasons sees increased energy consumption.

Mainland Europe has also struggled with energy supply problems recently, and a fire last week at a site in Kent in the south of England, which houses the main power cable bringing electricity over from France, could see it out of action until next March, the Guardian newspaper reported.

"Europe does not produce its own gas in any major volumes, hence its relying on imports from Russia, Norway and via LNG (liquefied natural gas)," Ole Hansen, head of commodity strategy at Saxo Bank, told the Market Watch website. "In addition, the green transformation and the European Emissions Trading system has seen the continent go all in on wind and solar."

With climate change-induced droughts having hit production from renewable sources, he added, the European gas market was experiencing a "supply crunch and extreme physical tightness, swinging from record storage surplus one year ago to record low inventories currently as the continent failed to attract adequate supply from abroad".

In addition to fears of domestic disruption, the UK food industry, which is already suffering supply chain issues, has voiced concerns about how energy problems could affect its ability to keep producing. However, Alok Sharma, the government member with responsibility for the COP26 climate change summit taking place in Glasgow starting at the end of October, told Sky News that the "clear message" was that there was "no immediate concern in terms of supply".

"We don't see any risks going into the winter," he continued. "People should be confident that the supplies will be there and that we will be protecting them in terms of price rises. But of course we are not complacent about this."