A Government adviser has warned that there is “no quick fix” to the energy crisis as gas prices continue to spiral.
It comes as the cost of energy bills is likely to rise by 30 percent next year – with warnings that electricity supplies will be “very tight” this winter.
Parliamentary Energy Adviser Dom Goggins told LBC’s Iain Dale that the issue was likely to go on until spring.
“We have some specific issues in Britain and we approach the winter now with households facing huge increases, alongside rising inflation and add to that a cut in Universal Credit, and you’ve got a significant problem for an awful lot of households.
“There are some solutions to this, but there’s no quick fix to it,” he said.
Governments around the world are trying to mitigate the impact on consumers, but recognize that they may not be able to avoid high bills.
The picture is further complicated by mounting pressure on governments to accelerate the transition to cleaner energy as world leaders prepare for a critical climate summit in November.
“This price shock is an unexpected crisis at a critical time,” EU energy chief Kadri Simson said on Wednesday, confirming the bloc will outline its longer-term policy response next week. “The immediate priority must be to mitigate the social impacts and protect vulnerable households.”
In Europe, natural gas now trades at the equivalent of $230 a barrel, in oil terms – more than 130% since early September and more than eight times higher than at the same point last year, according to data from Independent Commodity Intelligence Services.
Recommended Read: Experts Claim Climate Change to Be the Next Unprecedented Crisis for the US?
In East Asia, the cost of natural gas has risen 85% since early September, to about $204 a barrel in terms of oil. Prices in the United States, a net exporter of natural gas, remain much lower but have still risen to their highest level in 13 years.
“A lot of it feeds on fear about what winter will be like,” said Nikos Tsafos, an energy and geopolitics expert at the Center for Strategic and International Studies, a Washington-based think tank. He thinks the fear has caused the market to break away from the fundamentals of supply and demand.
The crisis is rooted in rising energy demand as the economic recovery from the pandemic continues, and a carefully calibrated system that can be easily disrupted by weather or mechanical problems.
“The current rise in European energy prices is truly unique,” energy analysts at Société Générale bank told customers this week. “Never before have electricity prices risen so quickly and so quickly. And we are only a few days into autumn – temperatures are still mild.”
The dynamism reverberates worldwide. In the United States, natural gas prices have risen by 47% since the beginning of August. The race for coal is also causing a spike in the price many European companies have to pay for carbon credits so they can burn fossil fuels.
In addition, the energy crisis is bolstering oil prices, which hit a seven-year high in the United States this week. Bank of America recently forecast that a cold winter could push the price of Brent oil, the global benchmark, above $100 a barrel. Prices have not been this high since 2014.
Jim Burkhard, who leads IHS Markit’s research on crude oil, energy, and mobility, said there is “no immediate relief in sight”.
“There is no Saudi Arabia for gas,” he said, referring to a single supplier that can ramp up natural gas production quickly. “This looks like it will make it through the Northern Hemisphere winter.”
Governments committed to reducing emissions are preemptively trying to send a clear message: This reinforces, not undermined, the case for investing in a broader mix of energy sources.
“It is very clear that with energy in the long term it is important to invest in renewable energy,” European Commission President Ursula von der Leyen said on Wednesday. “That gives us stable prices and more independence because 90% of the gas is imported to the European Union.”
