Gas price rises prompt urgent government talks

The government is holding urgent talks with representatives from the energy industry amid growing concern about a spike in wholesale gas prices.

Business Secretary Kwasi Kwarteng is talking to gas suppliers and others this weekend to hear how wide-reaching the impact of surging prices could be.

High global demand, maintenance issues at some gas sites and lower solar and wind output are blamed for the rise.

The high prices have already led two large UK fertiliser plants to close.

Government sources have said there is no threat to UK gas supplies and the impacts on small energy companies that might be the most exposed are being monitored.

But the BBC has been told that officials are looking at whether products that could end up being in short supply, such as fertiliser, could be imported from abroad.

Natural gas prices are at record highs as economies around the world begin to recover from the Covid crisis.

In the UK, lower winds have meant less renewable energy is generated. There have also been outages at some nuclear stations and lower flows into the UK of natural gas from Norway, pushing up the price of natural gas.

It is understood the discussions with senior figures from the UK’s energy sector were requested urgently.

Mr Kwarteng is talking to chief executives from gas producers, the National Grid, suppliers including Scottish Power, EON and EDF and the regulator Ofgem to hear how far-reaching the impact of the surge in prices is likely to be.

Dermot Nolan, director at Fingleton Strategic Consultancy and former chief executive of Ofgem, told the BBC Radio 4’s Today programme gas prices have increased not just in Britain, but all over the world, with “Germany and Spain experiencing similar types of increases”.

He said that “high gas and high electricity prices will be sustained for the next three to four months” and that it was difficult to see what the government could do about it.

UK consumers are already facing a big hike in bills this winter as higher wholesale prices have led to a recalculation of the energy price cap, but perhaps the more immediate threat is a shortage of carbon dioxide used in the food industry.

The energy intensive fertiliser industry has seen two huge plants in Teeside closed down as the gas price has made them uneconomic – which has caused knock on shortages of CO2 – a by-product of fertilisation production.

CO2 is used to stun animals before slaughter, as a coolant agent in transport and a shelf life expending agent in food packaging.

Nick Allen from the British Meat Processors Association described it as a ‘black swan event’ – meaning a rare but potentially destructive set of circumstances.

He said supply already stretched from shortages of labour in abattoirs and shortages of HGV drivers may break with this additional stress.

Meanwhile Richard Griffiths, CEO of the British Poultry Council has said the current situation felt more serious than previous CO2 shortages and that ministers would need to act quickly to make sure the government delivers on its promise to ‘save Christmas’.

Meat processors are also in talks with the government over this carbon dioxide shortage because of its use in the meat production process. The government source said CO2 supplies for nuclear power and hospitals would be prioritised.

A government spokesperson said: “The UK benefits from having access to highly diverse sources of gas supply to ensure households, businesses and heavy industry get the energy they need at a fair price.

“We are monitoring this situation closely and are in regular contact with the food and farming organisations and industry, to help them manage the current situation.”