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The British Energy Crisis

During the last couple of months, the United Kingdom has been afflicted by several crises. The hike in transport costs, the increase of goods price, and soaring inflation expected to rise above 4% by the end of 2021 are just a few of the events undermining the British population’s living expenses. The last concern hitting the country is the energy crisis. With suppliers failing one after the other, the country’s energy network is quickly falling apart, leaving customers scrambling to find other service providers. What seems to make the situation worse is that these economic headaches are interlocked together and feed on each other, plunging especially the poorest part of the British population further into despair. Indeed, Hinesh Patel, a portfolio manager at Quilter Investors, said that the “price rises are hitting the most vulnerable households, alongside the impacts of furlough on unemployment uncertainty”. While the British government prepares for the “worst-case scenario”, the fuel demand continues to grow worldwide, with oil prices reaching record-high levels.


The latest concern afflicting the British government is the energy crisis. Since the beginning of 2021, the wholesale cost of gas has grown by 250%, with an increase of 70% in the month of August alone. The British gas market plays a pivotal role in the country’s energy supplies inasmuch as it contributes to running its heating system, industry, and power generation, affecting more than 22 million houses. Because of the spike in the wholesale gas and electricity prices, numerous service providers have been forced to abandon the market, leaving customers rummaging for different options. On the 23rd of September, blaming “unprecedented market conditions and regulatory failings”, two British energy suppliers – Avro Energy and Green – crumbled, affecting 580,000 and 255,000 customers respectively. When commenting on the reasons that pushed the firm to this decision, Green said that it “fears that smaller energy suppliers are being left behind by the government, with rescue packages being put in place for larger suppliers and for private discussions to be held with the business secretary”. Discussing the precarious situation, the business Secretary Kwasi Kwarteng has affirmed that collapsed service providers should not be rescued by the government and added that it is not “the right thing for taxpayers' money to be injected into companies that have been badly run”. Alongside PfP Energy, MoneyPlus Energy, Utility Point, People's Energy, the caving in of Avro Energy and Green took the total of failing companies since September to six. With two more businesses expected to fail in the weeks to come, projections fear that there may be about 10 suppliers left by the end of 2021, down from 70 in January 2021. The British Prime Minister has dismissed the events portraying them as a “function of the global economy waking up after a long state of suspended animation” caused by the Coronavirus pandemic. Boris Johnson also added that “(T)he market is going to start fixing it, but in the meantime the government will do everything we can to help people, to help fix it, to make sure that we smooth things over”.


The issues connected to this industry are not only the result of the worldwide economic bounce back from the pandemic and the sudden increase in energy demand. Indeed, there are several factors that contribute to explaining this phenomenon, some of which are a low gas supply from Russia, low resources deliveries because of Asia’s high requirement of energy, a fire that led to the closing of a power cable importing electricity from France, or lax rules to enter the energy market. Moreover, the United Kingdom is characterised by a fossil-fuel heavy industry, meaning that the energy crisis’ repercussions trickle down to other segments such as manufacturing, chemical companies, or steelmaking. In particular, the CO2 is used extensively in the food supply chain for packaging, meat preparation, and to stun animals before butchery. As a result, carbon dioxide is used for producing a large number of items such as packed meat, infant food, or baked products; potato chips; pet food; fizzy drinks, beer, and wine; and the list goes on. Thus, Nick Allen, the chief executive of the British Meat Processors Association, has warned of the dire consequences the energy crisis – coupled together with the shortage of lorry drivers – will have on the British food supply chain. He alerted that the country could be as little as two weeks away from seeing meat disappearing from supermarket shelves. Similarly, Ranjit Singh Boparan, owner of Bernard Matthews and 2 Sisters Food Group, said that “(T)he CO2 issue is a massive body blow and puts us at breaking point, it really does – that’s poultry, beef, pork, as well as the wider food industry”. He also added that “(W)ithout CO2, the bottom line is there is less throughput and with our sector already compromised with lack of labour, this potentially tips us over the edge”.


Because of the energy crisis and predictions of fuel shortages, drivers across the United Kingdom have rushed to service stations to replenish their cars. The frenzy around petrol stations closely resembles the craze that drove customers to panic buying at the beginning of the Coronavirus pandemic. As several brawls seem to have originated at the stations and the population gets more agitated, the government is considering deploying the army to provide help in delivering gasoline. Due to these numerous crises and with Covid19 cases still significantly high, several experts are warning that “with no CO2 supply, Christmas will be cancelled”. Nonetheless, the Prime Minister seems to be confident that Britain’s situation is improving and that people should “just go about their business in the normal way”. In a matter of months, British citizens will discover whether Boris Johnson was able to save Christmas or if instead, he will be submerged by the crises tides.