Page 5 - EurOil Week 04 2022

EurOil COMMENTARY EurOil

The previous decision
to close the Rough
gas storage facility
(pictured) has drawn
criticism.

electricity and heating, as well as the underper- reduction in environmental levies, which pro-
formance of its wind farms this year. vided support for wind farms and other low-car-
In addition, energy prices in the UK are less bon forms of technology.
regulated than in most other European coun- Voices in the industry have meanwhile called
tries, and so consumers are more exposed to for some GBP20bn in loans to suppliers, to help
market volatility. Several dozen energy suppli- them stagger price rises over time. Others have
ers have already gone bankrupt as a result of the proposed something similar to a “contract for
situation. difference” scheme used for renewables, under
The government has held emergency talks which suppliers would receive money from the
with energy bosses on how to ease the burden government when wholesale gas and power
of the crisis on consumers. But so far no major prices are above a certain point, and pay it back
measures have been adopted to address the when prices fall below the threshold.
problem. Some of the government’s attention is Most of these options merely delay rather
instead on so-called “Partygate”, a scandal over than avoid the financial burden of high energy
an alleged series of parties that were held at 10 costs that the UK faces, however. But the govern-
Downing Street while coronavirus (COVID-19) ment can also take heed of the current crisis and
restrictions were in place that prohibited such take steps to ensure the UK is better protected
events. Prime Minister Boris Johnson has faced when prices turn bullish.
calls to resign, including from some members of The UK’s reliance on imported energy means
his own party. that it is more greatly exposed to fluctuations on
The government’s failure to act on the energy the global energy market. In contrast, US gas and
crisis would further weaken its popularity. There electricity costs have seen nowhere near as much
are a number of measures at its disposal. It could growth over the past year, owing to the country’s
cut VAT on energy bills, although this is seen as energy independence. The UK’s priority then
a blunt instrument that would affect richer and should be to invest in more domestic energy –
poorer consumers alike, and would have a fairly not just more intermittent renewables but also
limited impact on bills. extra gas. Not only will the UK benefit econom-
The government could make a more mean- ically from expanding domestic gas production,
ingful difference by providing direct financial but it will also reduce its emissions, as imported
support to low-income and vulnerable house- gas has a higher carbon footprint.
holds, potentially by widening the eligibility of The UK should also expand its gas storage
an existing scheme. The opposition Labour Party capacity. The country is one of the biggest gas
have also proposed a windfall tax on North Sea consumers in Europe but only has enough stor-
oil and gas producers, many of which are earn- age capacity to meet four or five days of typical
ing record profits on the back of high prices. winter demand. The Netherlands has nine times
But the industry has warned that such a move more capacity than the UK, while Germany’s is
would sell consumers “false hopes”, leading to an 16 times the size. Many have criticised a 2017
increase in energy bills over time because of cuts government decision to stop subsidising main-
to investment. tenance at the Rough storage site in the North
Some lawmakers have also called for a Sea, which resulted in the facility’s closure. ™

Week 04 27•January•2022 www. NEWSBASE .com P5