UK industry could face shutdowns as wholesale gas price hits record high

Steel, chemicals and fertiliser industries warn of difficult winter unless government takes emergency action

Last modified on Wed 6 Oct 2021 07.51 EDT

UK wholesale gas prices have hit fresh record highs, amid further warnings about the future of British energy-intensive industries and firms that supply domestic customers.

The wholesale gas price for day-ahead delivery rose above the £3 per therm level for the first time on Wednesday morning, hitting 350p at one point, even higher than the spike in demand for gas during February 2018’s “Beast from the East” cold snap.

Gas prices also hit highs across the continent, where the energy squeeze helped drive down shares, with Europe’s regional Stoxx 600 index falling 1.9% in early trading and the FTSE 100 down 1.8% in London.

British businesses that rely on high energy consumption – such as steel, chemicals and fertiliser plants – have warned that they will not be able to operate as normal during the winter unless the government implements emergency measures.

The Energy Intensive Users Group trade body said there could be shutdowns in essential industries without help from the government and the energy regulator, Ofgem.

Richard Leese, the chairman of the group, said: “We have already seen the impact of the truly astronomical increases in energy costs on production in the fertiliser and steel sectors.

“Nobody wants to see a repeat in other industries this winter given that UK energy-intensive industries produce so many essential domestic and industrial products and are intrinsically linked with many supply chains.”

While the cap on energy bills will ensure the high prices are not passed on to consumers, they will further hit stretched suppliers, 12 of which have already collapsed this year. The ratings agency Moody’s forecast the collapse of more companies and increased consolidation in the market.

The gas and energy price rises are being driven higher by a range of reasons, including lower production levels coupled with increased global demand, as well as a lack of wind required to power turbines, and forecasts of a cold winter.

Meanwhile the oil price has risen to levels not seen for several years, with the price of Brent moving above $83 a barrel, its highest level since 2018.

The rises come as temperatures are beginning to drop across Europe and consumers are increasingly turning on the heating at home. “This price shock cannot be underestimated,” the EU energy commissioner, Kadri Simson, said on Wednesday. “If left unchecked, it risks compromising Europe’s recovery.”

The EU’s climate policy chief, Frans Timmermans, said its carbon market was not the cause of soaring gas and power prices. He said: “The EU climate law is our guiding principle, and we will not open that law again.”

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