Gas prices and supply chain woes trickle down to consumers

Only two months before Christmas, consumers found themselves facing empty supermarket shelves, retail and wholesale stock shortages, and steeper energy bills. The backdrop is the soaring global energy prices. Global wholesale gas prices have soared 250% since the start of 2021, the UK being the hardest hit due to its reliance on imported gas for heating, industry, and power generation.

There were multiple reasons behind this shortage. An especially cold European spring and Asian summer boosted energy demand. Industrial production recovery also meant that more natural gas was required. Disruptions in the supply side, including several gas platforms in the North Sea closing for maintenance as well as damaged cable that imports electricity from France, also pushed up prices. This all combined with a suspicion that Russia’s state-backed company Gazprom was manipulating the market by purposely pumping less gas into European stockpiles. All of this led to a tighter gas market with less spare capacity.

Prime Minister Boris Johnson admitted there were “a lot of short-term problems” caused by gas supply shortages, but he said: “This is really a function of the world economy waking up after Covid.”

The spiking prices have led to the collapse of a number of small utility firms this year, as they were no longer able to deliver to fixed price promises to customers. The regulator, Ofgem, was forced to transfer over two million customer accounts to surviving firms. Consumers could see their bills increase by up to thirty percent a month.

The Northampton-based electricity supplier Opus Energy announced that it is confident of surviving the current crisis and will continue to supply over 360,000 business premises. Their spokesman said: “We have a strong balance sheet, and have hedged our supply businesses appropriately, which together should give confidence to our customers and employees.”

As a result of the lack of gas supply, food producers have also faced shortages. Commercial carbon dioxide, a by-product of fertiliser production, is used to stun animals before slaughter, package fresh food, and keep food cool during transport. Without the necessary gas for animal slaughter, the British Meat Processors Association warned of meat shortages.

A particular point of concern is the turkey supply. In fear of Christmas shortages, shoppers flocked to supermarkets to stock up for the holiday season. The supermarket chain Iceland said frozen turkey sales quadrupled under panic buying.

Oundle businesses have not been affected. Seven Wells butchers said that they have not faced any shortages. Their products are from local farmers and their seasonal turkeys are sourced from a farm in Aldwinkle, as in previous years. Global supply shocks have not yet seemed to affect local producers.

Cherry Yang
December 2021