Government pins blame on market forces for GB energy crisis
Government pins blame on market forces for GB energy crisis
The dispute between Russia and the Ukraine over gas prices and
supply has exposed Britain's vulnerability of supply at the
precise time our reserves are at their lowest in years.
We have all been drip-fed with the story of how this winter will
be the tightest yet between the supply of and the demand for
gas, but who would have believed in the distinct possibility
that Britain could be left short as a result of a dispute in the
Eastern block? After all, we don't import gas directly from
Russia. Our supplies come from the gas fields in the North Sea
(albeit greatly depleted nowadays), the Norwegian pipeline, LNG
shipped from around the world and, increasingly, from Belgium
through the Zeebrugge pipeline.
However, Russia does supply huge amounts of gas to Germany,
Italy, France and Austria. We are increasingly dependent on
Europe to supply gas to us through the Belgian pipeline and when
their own supplies are threatened, which could be a real
possibility given the current crisis, then Europe is likely to
look after itself first before turning on the flow to the UK.
The mere possibility of a threat to supplies is likely to push
up the price still further than the record wholesale prices we
are already experiencing.
So how did we, who were self-sufficient with our own gas fields
and had state-run energy monopolies only 7 years ago, get into
such a pickle?
The answer lies in the fact that we no longer have state-run
monopolies, having opened our markets to 'free competition',
whilst the rest of Europe maintained their monopolistic
structures.
Their sheer size enabled them to march into the UK and virtually
uncontested, acquire the bulk of our energy suppliers. But
despite huge protests from the UK, and in particular, the
remaining UK heavyweight Centrica, they have been able to
protect their own markets and all sources of supply.
It's no surprise, then, that a recent survey of British
businesses has pointed the finger at the Government for the huge
rises in energy prices despite Gordon Brown's efforts to pin the
blame on market forces and the failure of OPEC to step up oil
production in response to escalating global demand.
Electricity4Business' view
Things could have been so different. The idea of bringing
competition into the market is a sound one. However, mistakes
were made by allowing huge companies to get involved in
generation, distribution and retail. By doing so, they were able
to secure a stronghold. Foreign conglomerates were allowed to
walk away with the energy crown jewels and by participating in
this sell off our government effectively compromised our
security of supply.
Impact on business electricity
The business sector has been dealt a double whammy. Firstly,
there's no running away from the fact that having to buy gas
from Europe to replace indigenous supplies will add to the
wholesale price of gas, and therefore, electricity. When the
supply to Europe is being affected by the dispute then the price
will rise further still.
But to rub salt in the wound, many businesses are experiencing
rises well above those that may be justified by the rise in
wholesale prices and since the market is dominated by the big 6
suppliers businesses have little muscle to negotiate better
prices.