Gas supply crunch

[adam2]

As is well known, most domestic consumers of gas and electricity are being protected against major price increases for now by the government price cap.

This clearly does not apply to very large gas users such as fertiliser factories, hence the closure thereof until an emergency subsidy was given.
Steel recycling in electric arc furnaces has also been restricted due to the high price of electricity.

Does anyone know to which consumers the price cap applies ?

Domestic only ?

What about smaller businesses
Corner shops ?
Restaurants ?
Pubs ?
Hotels ?
The absence of howls of outrage from the above makes me suspect that they ARE protected at least for now. But does anyone know for certain ?

If such smaller business users are indeed protected, then what about larger business premises, or groups operating many such premises ?
Supermarket chains ?
Hotel groups ?
Department stores ?
Shopping malls ?
Large office blocks ?
Again the absence of howls of outrage makes me suspect that such users are protected against market prices, at least for now.

But does anyone know what the rules are ?

[kenneal - lagger]

I wonder if this is economic warfare carried out by Russia? If it is seen as this we could well see in December after COP an investment in UK based gas supply rather than an investment in home insulation to reduce demand.

[adam2]

I do not trust Russia, though we must remember that it is their gas !

Meanwhile does anyone know to which types of customers the price cap applies ? See my earlier post for details.

[clv101]

I do not trust Russia, though we must remember that it is their gas !

Yes, it is and they have increasing demand from the East. Why choose to sell to hostile, sanction imposing UK when they could build important economic and political ties with China?

[BritDownUnder]

I do not trust Russia, though we must remember that it is their gas !

Yes, it is and they have increasing demand from the East. Why choose to sell to hostile, sanction imposing UK when they could build important economic and political ties with China?

I think the Chinese are a bit more savvy than that and will have a lot of sources of gas from elsewhere so they can just stop the Russian gas supplies if the price gets too much. I think Chinese may also insist on a long term fixed price and delivery volume like they do with Australia.

Also I think the Chinese have made the Russians build all the gas transmission infrastructure and pay for it themselves. The Chinese wear the trousers in this relationship. Link

The pipeline is scheduled to provide China with 10 billion cubic meters of Russian gas in 2021 and the amount is expected to increase to 38 billion cubic meters annually from 2024, according to the 30-year, $400 billion contract signed by Russian gas giant Gazprom and China National Petroleum Corp in 2014.

In 2020, China imported 101.6 million tons of natural gas, of which nearly 8 percent came from Russia, customs data showed.

China imported natural gas from 24 countries last year. The top five sources of imported pipeline gas are Turkmenistan, Uzbekistan, Kazakhstan, Myanmar and Russia, according to statistics from the Ministry of Commerce.

Moral of this story is diversify your suppliers and don't become too dependent on one. The UK used to import LNG from Algeria. Why not still do this? Also from Trinidad or even the US.

[clv101]

Gas prices up another 10% to fresh high, energy wise equivalent to around $170 oil!

[Potemkin Villager]

Jeremy Corbyn should be feeling quite relieved he didn't become PM.

It will not be a pretty site watching Doris and Co trying to deal with it.

[adam2]

Now at 250 pence a therm, or over three times the last peak, and about six times the norm for this time of year.
I consider this to be very serious, despite the short term petrol panic being more newsworthy.
Eventually, even the "big six" suppliers wont be able to sell gas for less than half what it costs them wholesale.

It is not even winter yet.

[clv101]

It's amazing, how high can it go? North of $180 in oil terms now. This is totally impossible for large industrial users, if it doesn't come back below say 100p/therm within a few weeks the industrial impacts will be significant.

Not sure how the big retailers can continue to sell cheap, price capped gas all winter.

[adam2]

And for domestic users, I see two options.

Option one.
Charge nearly the full market price, say an extra £1000 a year. If the poor can not pay this extra, cut of the supply. If they riot, get the army to shoot them. If they die, as a minority will, then that reduces demand a bit.

Option two A
Subsidise energy bills to keep them down to only slightly above present values. Increase income tax by say £2,000 a year to pay for the £1,000 a year energy subsidy. Probably a non starter as many on low wages would lose more in income tax then they gained from the fuel subsidy.

Option two B
Subsidise energy bills by say £1,000 a year, and increase the higher rate of income tax by say £5,000 a year to pay for this. Probably a non starter as higher rate tax payers might leave the country, and pay lower tax somewhere else.

Many more complex permutations of the above exist, but ultimately some hard decisions will have to be made. And remember that even without any domestic energy subsidy, that significant tax rises will be required to pay for the energy used by government buildings, hospitals, schools, civil service offices.

[Stumuz2]

Option two A
Subsidise energy bills to keep them down to only slightly above present values. Increase income tax by say £2,000 a year to pay for the £1,000 a year energy subsidy. Probably a non starter as many on low wages would lose more in income tax then they gained from the fuel subsidy.

No easy answer, Spain has issued a windfall tax on the electricity generators,
https://apnews.com/article/europe-busin ... 258419e2fd

A day later the generators have threatened to shut down if they levy the tax,
https://english.elpais.com/economy-and- ... bills.html

[clv101]

At what point does this switch from being an economic issue, high bills, extra taxation etc, to a more straightforward one of being many bcm short this winter - some/many customers doing without?

[adam2]

AT PRESENT it does seem to be strictly an economic issue. Prices are exceptionally high but I see no indication of physical shortages AT PRESENT.

Physical shortages are of course possible, if they do occur then I doubt that domestic gas supplies will be cut off for safety reasons. Rota power cuts are more likely, as are restrictions on use of gas and electricity for non essential purposes.

[Stumuz2]

Physical shortages are of course possible, if they do occur then I doubt that domestic gas supplies will be cut off for safety reasons. Rota power cuts are more likely, as are restrictions on use of gas and electricity for non essential purposes.

Which would have also de facto massively reduce gas consumption. First in not burning gas to produce electricity, secondly, most gas boilers won't work without electricity.

[kenneal - lagger]

Option 2C
Put energy prices on a sliding scale so the more you buy the more you pay. That will mean people in big houses and with more than one house pay more and it could be substantially more to reflect their surplus income. That might see a lot of big houses come on the market which could be good all round as it would slow the inflation in house prices considerably.