Long, cold winter ahead for Britain could keep gas prices soaring to record levels
The UK faces a greater than normal risk of cold winter weather this year, according to meteorologists, which threatens to ignite greater demand for gas and keep gas market prices sky-high until 2023.
Both meteorologists and energy market experts are predicting a grim season ahead for UK households, millions of which could lose their energy supplier as companies collapse under the pressure of rising gas prices.
Gas market prices in the UK have quadrupled in the past year due to strong global demand. The hikes were compounded by a string of outages in the electricity system, including a fire at one of the UK’s main power import cables, which has increased its reliance on gas power plants.
The market’s “forward” prices indicate that fuel prices are likely to remain at record levels through the colder months, bringing a winter of discontent for hard-pressed families.
Early weather-pattern modelling by the US forecaster DTN points to a colder winter for the UK and northern Europe this year, with signals of a weakening of the polar vortex “which helps send Arctic air on the move”.
Although it is too soon for official forecasts, DTN said there was “certainly a greater than normal risk of a cold winter for the UK”, with February earmarked as “the coldest of the three winter months”.
Experts fear that a long, cold winter will expose the UK to gas shortages and severe market shocks because its gas storage levels are dwarfed by stores in neighbouring European countries.
Kim Fustier, an analyst at investment giant HSBC, warned that, with European gas stores at levels well below normal, a particularly cold winter could drive prices to new record highs. Gas prices were expected to remain at exceptionally high levels this winter, she said, and to stay high next summer before normalising in 2023.
“A colder-than-average winter could push storage levels to dangerously low levels, raising risks of price spikes and/or shortages in some countries,” she said. “The UK’s situation is more precarious than its European neighbours because of its very limited storage capacity.”
The UK has only enough gas storage to meet four to five days of winter gas demand, while neighbouring European countries typically have several weeks’ worth of gas.
The gas market has already brought factories in the north of England to a standstill, and derailed the carbon dioxide supply chain, which is vital to the food, drink and meat production industries.
The record gas price highs are expected to drive up energy bills for millions of households from October, with further price rises expected in April, which could drive a total of 1m additional households into fuel poverty by next summer.‘Relying on luck’: why does the UK have such limited gas storage? Read more
Consumer groups fear that the collapse of small suppliers struggling to keep up with the surging cost of gas could result in vulnerable households missing payments from the “warm home” discount scheme, which helps to make heating bills more affordable.
Gillian Cooper, the head of energy at Citizens Advice, said many of the poorest households were “facing an incredibly tough winter, with rising energy bills and the £20-a-week cut to universal credit”.
“For people whose suppliers have failed, it’s an especially worrying time,” she added. “Many people on low incomes risk losing their £140 warm home discount when they’re moved to a new supplier. Some customers in debt may see their agreed repayment plans torn up.”
Cooper called on the government and Ofgem to guarantee that no one lost access to “this vital financial support” when they were moved to a new supplier.
“And suppliers should ensure people in debt to failed companies have access to affordable repayment plans to stop them spiralling further,” she said.