Commentary: Soaring oil prices and how British failures made the global crisis worse


COVETRY, UK: The UK government has entered into emergency talks with energy industry leaders as gas prices (and with them, electricity prices) soared to more than four times the level they were at the same time in 2020.

Concerns are growing about the security of gas supplies in winter, and gas-dependent industries, such as the fertilizer industry, are cutting production, threatening various supply chains.

Consumers are facing significant price increases and energy regulator Ofgem has already had to raise its price cap, and may have to do so again.

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Some small energy companies have gone bankrupt and others may follow. Amid all this, the government continues to claim that the UK benefits from a diversity of natural gas supply sources.

This is true, but it masks the nature of the problem facing the country.


The problem is not the UK’s physical supply of gas, about half of which comes from its own production sites, with the rest coming from Europe or shipped as liquefied natural gas (LNG) from from the United States, Qatar and Russia. The problem is the price the UK has to pay to continue to receive these supplies.

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The pandemic brought down demand for gas in the spring of 2020, resulting in low gas prices, reduced UK production and delayed maintenance and investment work along global supply chains.

Then, at the start of 2021, a very cold winter in Asia caused a spectacular surge in LNG spot prices. A hot summer followed, increasing the demand for electricity for cooling.

The resulting high LNG prices limited deliveries to Europe, but bottlenecks were lifted and economies recovered. Demand for energy has exploded.

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