Wholesale gas prices hit new all-time highs on Wednesday, prompting warnings that factories could be forced to shut down during the winter or switch to more polluting fuels just as the UK Uni is hosting the Cop26 climate conference next month.
The crisis has already sparked a wave of collapses among energy providers which has led to warnings of “desperate choices” for households likely to face higher bills as a result.
As energy-hungry sectors such as steel, glass and chemicals wage their own battle against soaring gas and electricity costs, they warned of further shocks for industry and consumers. including rising commodity prices and temporary plant closures.
Growing concern over the domino effect of high energy prices came as the cost of gas for next day delivery hit 350 pence per therm on Wednesday, while gas for November delivery hit 407 pence , two new records. Prices fell later after Russian President Vladimir Putin signaled that the country, Europe’s largest gas supplier, was ready to help ease the crisis.
But prominent figures in energy-intensive industries said serious ramifications could already be seen unless the government heeded their call for action to cut energy costs.
Trade body UK Steel has said it is now “unprofitable” to manufacture steel at times in the UK, with UK companies facing double the electricity prices paid by rivals in Germany in France and the Netherlands. British Steel, based in Scunthorpe, has started adding surcharges of up to £ 30 a tonne to its products to recoup higher energy costs, driving up costs for customers in the construction and automotive industries.
David Bailey, professor of business economics at Birmingham Business School, said consumers could end up feeling the pinch if steel remained expensive. “They will pass it on to consumers at the end of the day, so that it can increase the price of cars,” he said.
Network Rail, which owns 20,000 miles of British railway and buys around 97% of its track from British Steel, said it had yet to see a price increase.
With the UK just weeks away from hosting the Cop26 global climate conference, leaders in the glass and minerals industries have said high gas prices could ultimately lead to increased pollution.
Richard Stansfield, managing director of lime maker Singleton Birch, said increased production costs were being passed on to consumers, including water companies and businesses that use the mineral to turn waste into energy.
“We could end up in a ridiculous situation where it is cheaper to landfill waste than to put it in waste-to-energy plants,” he said. “There are all kinds of ripple effects. “
Paul Pearcy, federation coordinator at trade body British Glass, said companies making windows may be forced to revert to fueling their ovens with polluting fuels that had been ditched.
“Some of our members still have heavy fuel oil on site, having switched to gas,” he said. “Some of them are seriously considering going back to this because of the price of gasoline.
“As the prices move, it becomes more and more financially attractive, but with the Cop26 approaching, it’s not good publicity.”
Glassmakers and steelmakers keep their furnaces running continuously, making shutdowns extremely difficult, time-consuming and expensive.
Jon Flitney, of the British Ceramic Confederation, said the same applied to its members’ ovens, meaning any decision to scale back operations would “not be taken lightly.”
However, he said if prices remain high, “the balance between income and operating costs may change.”
The glass, steel and minerals industries are all members of the Energy Intensive Users Group trade body, which has warned of shutdowns in critical industries without help from the government and the energy regulator. , Ofgem.
Richard Leese, chairman of the group, said: “We have already seen the impact of truly astronomical increases in energy costs on production in the fertilizer and steel sectors.
“No one wants to see a repeat in other industries this winter as UK energy intensive industries produce so many essential household and industrial products and are intrinsically linked to many supply chains.”
The group called for exemptions for energy-intensive industries from measures to help finance renewable energy and penalize carbon emissions.
Any slowdown in working hours could weigh more heavily on the economy, adding to concern in sectors such as construction, where shortages of materials and personnel have driven growth expectations to an eight-month low, according to the reports. survey figures released Wednesday.
Soaring gas prices have already wreaked havoc on UK businesses, forcing fertilizer factories to close and capsizing 12 energy suppliers. A 13th, Omni Energy, warned its customers on Wednesday that it could cease operations in November.
Energy advisor Cornwall Insights said he expected the effect to push up household energy bills through 2023, by raising the government’s cap on energy prices .
He expects the energy price cap, currently set at £ 1,277 for an average dual-fuel customer paying by direct debit, to reach £ 1,659 for summer 2022 and £ 1,663 for next winter.
The Commercial Department said: “We are committed to securing a competitive future for our energy-intensive industries and in recent years we have provided them with extensive support, including over £ 2bn to reduce the costs of the industry. energy and protect jobs.
“Our exposure to volatile global gas prices underscores the importance of our plan to create a strong and local renewable energy sector to further reduce our dependence on fossil fuels.”