It used to be that Britain could make all of its own gas, but that’s no longer the case. Now, with North Sea gas reserves dwindling, the country has to rely on importing its gas. That means we are competing with other countries, and when there is a gas shortage, then the price of gas will naturally rise. In some cases, a gas shortage will be caused by routine maintenance on gas fields or pipelines, which are planned well in advance and easy to predict. It’s when there are unplanned interruptions that demand will outweigh supply, and prices will inevitably rise.
In 2017, the UK’s biggest gas storage site was closed down. That meant that the country dropped from having 15-days’ worth of gas in storage to just four/five days. This had a huge impact on gas prices, especially in 2018 when the UK experienced a particularly cold winter. A gas shortage warning saw the price of gas shoot up to its highest in more than a decade. Although industry experts have strongly urged the current government to take a closer look at its gas storage plans, the Department for Business, Energy, and Industrial Strategy believes that a combination of gas pipelines and LNG tankers is more than sufficient.
Like every internationally traded commodity, gas prices are affected by fluctuations in the value of a currency. As a country, we buy a lot of gas from Europe, and that means the price that appears on your gas bill will often reflect the strength of the pound. In recent years, the strength of the pound has dropped to an incredibly low level. That’s led to a rise in gas prices that are reflected on your gas bills. Should the political landscape go through any further changes, then the GBP will be affected. Whether that’s going to be good or bad for gas prices is yet to be seen.
In the UK, we create more energy from offshore wind generators than any other country. Britain alone accounts for over 40% of the global capacity for wind-generated energy. This is only going to continue to grow, with government plans to generate at least a third of all of its electricity needs via wind power by 2030. Of course, on the less windy days, less energy is being generated. That means natural gas needs to be diverted to power stations, and that results in an increase in prices. As we grow more reliant on wind-generated energy, any long-term drop in the power of that wind will mean potentially skyrocketing gas prices.
This is another element of supply and demand. It makes sense that when we experience hotter than normal weather spells, we use less gas. That means demand is low, and gas prices will drop. When it gets colder, we use more gas, so demand goes up, and so does the price of gas. Wholesale gas will have been bought in advance, which means that prices are often based on the weather forecast. Unpredictable and unforeseen weather events can then cause a high level of disruption, which can be reflected in the price of gas.
This is one of the biggest factors to influence the price of gas in the UK. From restrictions on amounts that can be bought and sold, legislation is always going to affect the price of gas to environmental impact considerations. When a country shuts down a gas field due to growing reliance on alternative energy, that leads to a decreased supply of gas, which makes the price of gas go up. A rise will closely follow any announcement changes in the gas supply infrastructure in the price of gas.
From global disruption to changes in how we get gas and produce energy, gas prices are always going through changes. Not all of those changes will affect every business owner, but it’s always worth keeping an eye on the bigger picture when it comes to your gas costs. Being better able to predict when gas prices will fluctuate means you’ll have much more control over your business finances.