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Energy Price Rise Update: Summer 2017

What impact will Brexit, the closure of Rough and the Qatari crisis have on energy prices?

The UK’s largest gas storage facility is set to be closed permanently, it has been announced.

The move follows a part closure and periods of inactivity last year, after failed safety inspections and issues with the viability of some of the storage containers. You can read our previous update here.

In a recent statement, Centrica, the parent company of British Gas and owner of the facility said:

“Due to the age and condition of Rough, we can no longer safely inject gas into the reservoir and build up the pressure in the well.”*

The costs for running these kind of facilities is high and the gas business is becoming increasingly marginal in terms of profit.

Rough accounted for approximately 70% of the UK’s total storage and in peak winter months, provided 10% of the country’s gas supply.

The closure will mean Britain becomes more reliant gas imports from overseas. Many analysts and industry watchers from the likes of Barclays believe this could result in greater volatility of wholesale gas prices entering the winter months.** We will be more exposed to international price fluctuations and potential negative effects on prices.

Concerns around our reliance on international imports stem beyond price issues. Some commentators believe that supply is vulnerable to other influences, such as conflicts involving supplying countries and any resulting unrest. For example, Qatar supplies around 33% of the UK’s gas and is currently experiencing a diplomatic crisis, which could impact supply.** We’re also yet to see what role Brexit could play in the stability of the market.

Simple supply and demand rules dictate that prices will be pushed up if supply comes under pressure, and although it has not hit the consumer or business energy markets yet.

Make It Cheaper’s Nick Heath remarks:

"If we can’t store enough gas for Winter it will make us over-reliant on imports and that carries risk. Not least from the political unrest and sanctions surrounding Qatar. We use a lot of their LNG and, if access to it is restricted, we could face severe shortages and will simply have to pay the price that other countries demand."

As we’re entering a period of uncertainty, it’s important for small businesses like yours to be able to secure costs wherever possible. Our tip would be to protect yourself from any future prices rises by securing a better deal on your business energy today.

The good news is, we can help. One of our energy experts can compare our best deals for you to find the right contract for the needs of your business. Get in touch today, or request a call back here.

 

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* https://www.thetimes.co.uk/article/centrica-storage-wants-to-shut-north-sea-storage-facility-t9jspm2hz

** https://www.theguardian.com/business/2017/jun/20/uk-gas-storage-prices-rough-british-gas-centrica