Dash for gas sparks oil switch, pushes more suppliers to brink

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LONDON (Businesshala) – Rising gas prices are expected to drive a switch to oil and put more energy suppliers out of business in Britain, while industry groups called on Thursday for government action to ensure that this winter There should be no interruption in supply.

FILE PHOTO: Gas pipes are seen next to an unused gas holder in Manchester, Britain September 23, 2021. Businesshala / Phil Noble

Natural gas prices, especially in Europe, have risen this year due to lower-than-normal stocks, reduced supplies from Russia, the onset of colder temperatures and a lack of infrastructure.

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The harsh growth prompted some analysts to forecast an increase in global crude oil demand by several hundred thousand barrels per day (bpd), squeezing already tight supplies, as countries turn to oil to generate electricity over the winter. switch on.

Record high energy prices in Britain and Spain have already prompted some industrial companies, such as steelmakers and fertilizer plants, to cut production and even warn of food shortages this winter Is.

Pressure has also been felt in China, where the use of electricity has been restricted by the authorities.

“This has never happened before on a global scale. The market has always tried to switch from expensive oil to very cheap natural gas,” said chief SEB commodities analyst Bjarne Schildrop, adding that the reversal is underway as users switch to oil.

The reversal in oil, a month before international climate talks begin in Glasgow, underscores the difficulty of cutting emissions and transitioning to green sources of energy.

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Meanwhile, Britain’s National Grid warned here that the country was facing a tight supply of electricity this winter due to rising demand and capacity constraints, though a top official said they were confident the lights would be on. Will keep

Any action to curb prices would be too late for 12 energy suppliers, which have already collapsed this year, with high wholesale gas prices in the UK pushing up wholesale electricity prices as the country’s electricity generation It accounts for about 40% of gas.

Regulator Offgame said here on Thursday that more British energy suppliers are likely to exit the market turmoil.

‘Comprehensive support’

The rise in gas prices has been a boon for some companies such as Royal Dutch Shell, which boosted cash flow from rising gas and electricity prices.

Shell is a top seller of liquefied natural gas (LNG), which accounts for about 20% of global demand, although its sales have declined in recent months due to production problems.

The company’s British power retail business has benefited from the collapse of smaller rivals, recently picking up 255,000 new customers after a competitor’s default.

Britain’s Energy Intensive User Group (EIUG), which represents companies such as manufacturers of steel, chemicals, fertilisers, paper, glass and cement, has urged the government to take emergency measures to ensure that energy supplies are disrupted. not and be distributed. reasonable price.

Further electricity prices in the UK are set to be higher than last winter as gas prices hit record highs.

“The issue is not just of gas and electricity supply, but also of price. Energy intensive industries may be priced out of the market,” EIUG said on Thursday.

The UK Department of Business, Energy and Industrial Strategy (BEIS) said it was “determined to secure a competitive future” for energy-intensive industries and had provided them with “extensive support” in recent years.

Reporting by Noah Browning, Ahmed Ghadar, Susanna Twidel, Ron Busso, Nina Chestney; Written by Alexander Smith; Editing by Carmel Crimins

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