Why Are UK Gas Prices So High, and Could It Affect the U.S.?

Europe’s vitality market has descended into chaos. A fuel scarcity has despatched costs spiraling to surprising highs with knock-on impacts on the whole lot from electrical energy to meat manufacturing.

The UK has been notably onerous hit. Nationwide, common vitality costs this previous month have been almost three times increased than in some other September previously 10 years, with the common family expecting to pay practically $190 extra this 12 months. Energy payments are set to extend much more steeply after Friday, when a worth cap on payments is set to rise. 

These sky-high energy costs are sparking concerns about potential energy outages this winter, which might ship vitality costs even increased and pressure extra companies to shut. The disaster exhibits the risks of relying too closely on fuel going ahead.

Why Are Gas Prices So High?

The drivers of this disaster are advanced, however the important thing issue is the worldwide worth of fossil fuel, the facility supply on which the UK is most dependent. More than a third of UK households have fuel stoves and 86% depend on it for heating. Gas additionally accounts for 42% of the nation’s electrical energy technology.

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

The issues began final winter, when uncharacteristically low temperatures caught round via March. Due to the chilly, nations throughout the northern hemisphere ran via their fuel reserves at a quick clip. At the identical time, nations started to emerge from covid-19 lockdowns, creating extra demand for vitality and sending fossil fuel costs skyward.

Some European fuel shops would usually have been replenished by Russia, however in recent times, the nation has been increasing shipments of fuel to China whereas decreasing its provide to Europe. A drought in Brazil lowered hydropower technology, additionally driving up demand for fuel energy there.

Other types of vitality have didn’t fill the hole. Nuclear energy crops are down for upkeep, a significant cable used to import electrical energy from France caught fire and was taken offline, and wind generators’ manufacturing has decreased amid the least windy summer since 1961.

“It’s really a lot of different kinds of factors, all happening at the same time,” mentioned Euan Graham, senior researcher on the suppose tank Third Generation Environmentalism.

What Are the Effects?

The crunch is forcing UK factories to shutter. Several fertilizer crops have announced they’re halting operations because of the excessive worth of fuel. Industrial carbon dioxide, which is produced as a byproduct of fertilizer, is now briefly provide. As a outcome, soda producers are struggling. So is the meat industry, which makes use of carbon dioxide to stun animals earlier than they’re slaughtered.

“We’re two weeks away from seeing some real impacts on the shelves,” Nick Allen, the top of the British Meat Processors Association, informed Sky News final month.

Nearly everybody within the UK is impacted by the vitality crunch, however low-income folks with the very best want for energy are seeing the worst results.

“Worst off of all are elderly people, and people with disabilities, who suffer more from the cold, need more heat, and have least resources to pay the bills,” mentioned Ruth London of the marketing campaign group Fuel Poverty Action, in an e mail.

Low-income housing additionally tends to be extra poorly insulated, making it much more pricey to warmth. To make issues worse, this enhance in utility payments coincides with a gasoline scarcity pushed by an absence of truck drivers, which is driving up the value of gasoline. It additionally comes simply earlier than a cut of $27 per week to universal credit, the UK’s welfare system which serves 6 million households.

“We’re going to see these things hugely increase the basic cost of living for the people at the lowest part of the income sector,” mentioned Adrienne Buller, London-based senior analysis fellow targeted on Green New Deal coverage on the suppose tank Common Wealth.

How Can the UK Solve Its Gas Crisis?

This vitality disaster, like others earlier than it, exhibits that overdependence on fuel is a recipe for catastrophe. But there are methods for the UK to spice up vitality reliability whereas decarbonizing the sector.

“First and foremost, the UK needs to get really serious about energy efficiency,” mentioned Graham. Efficiency and weatherizing properties would cut back demand and save folks cash on their vitality payments.

Another pressing step, Graham mentioned, is to maneuver away from fuel boilers, which the overwhelming majority of UK properties rely on for warmth.

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

The UK has a number of catching as much as do on each fronts, because it’s been transferring within the flawed course. In March, the Boris Johnson administration killed a grant for inexperienced properties, which allotted funds to spice up vitality effectivity and set up warmth pumps, simply six months after it was launched. A Greenpeace research launched earlier this month additionally discovered that the UK is lagging behind other European countries in warmth pump set up. Not precisely inspiring for a nation internet hosting the United Nations local weather convention subsequent month.

The nation should additionally make investments massively in renewable vitality. But Connolly mentioned this have to be executed with intention.

“It’s not just like, build more renewables and all will be well. It’s really thinking about the whole suite of technological solutions that need to be built around renewables,” she mentioned.

That contains large-scale battery storage and interconnectors to transmit energy from place to position. It additionally means guaranteeing clear energy sources like wind and photo voltaic are unfold out.

“It’s not like the wind is ever not blowing somewhere in Europe,” she mentioned.

These modifications received’t be made in a single day, although. With residents dealing with a pinch, Connolly mentioned the UK authorities ought to take steps to assist them take care of excessive payments corresponding to tax breaks and social help packages, notably low-income households.

Could High Gas Prices Affect the U.S.?

The UK has been notably affected by the vitality crunch as a result of it’s so closely depending on fuel and lacks facilities to store it. But the consequences of excessive fuel costs have been felt around the globe.

“The first place that was hit by the this gas crunch was actually Spain and Portugal,” mentioned Connolly. In the 2 nations, common wholesale electrical energy costs are triple the level they have been at six months in the past.

China can also be feeling the heat. There, millions of people noticed vitality blackouts, companies are shuttering over growing utility payments, and a few employees have been hospitalized with carbon monoxide poisoning after air flow methods misplaced energy.

Though the impacts aren’t at present as seen within the U.S., excessive costs might nonetheless take toll. This winter, the price of house heating might rise dramatically. Half of the nation’s properties use fuel for warmth. If chilly temperatures arrive early this winter, that would deplete the nation’s already below-average stockpiles levels and inflate costs additional.

“If we get an early frost, it could get ugly. It could get ugly fast,” Robert Yawger, director of vitality futures at Mizuho Securities, told CNN Business.

Americans are already fighting excessive costs of different items resulting from inflation, and excessive vitality costs might even additional hit folks’s pockets.

“I don’t think that the U.S. is immune from being concerned about these volatile global gas prices,” mentioned Connolly. “The gas crisis happening in Europe is a warning.”