EU Referendum


Energy: the crisis paradox


27/09/2021




While the legacy media indulges itself in lavish coverage of a totally engineered crisis, driven by panic buying, and the Labour Party seems intent on following a path to self-immolation, the real crisis is steadily building in momentum.

This is the so called "gas crunch" which has temporarily dropped in the batting order but is set to re-emerge of the dominant issue of the winter. The impact is potentially so severe that it could bring this government down, finally consigning the incompetent Johnson to his much-deserved oblivion.

Yet, even with the Telegraph, which, is still talking about a "Winter of Discontent", the media seems determined to play down its impact, which looks increasingly likely to trigger prolonged power cuts through the winter, bringing our halting economic recovery crashing to a halt.

One clue that there is something more than unusually amiss came in yesterday's Observer which ran an article entitled, "Long, cold winter ahead for Britain could keep gas prices soaring to record levels", remarking that meteorologists and energy market experts "predict a grim season for hard-pressed and vulnerable families".

The text leads with the prediction that the UK faces a greater than normal risk of cold winter weather this year, referring to "early weather-pattern modelling by the US forecaster DTN".

This points to a colder winter for the UK and northern Europe this year, with claims that there are signals of a weakening of the polar vortex "which helps send Arctic air on the move". Although we are cautioned that it is "too soon for official forecasts", we are left in no doubt that there is "certainly a greater than normal risk of a cold winter for the UK", with February earmarked as “the coldest of the three winter months".

The polar vortex point is somewhat at odds with this report. It tells us that a new stratospheric polar vortex has now emerged over the North Pole and will continue to strengthen well into the Winter of 2021/2022. It will, the report says, interact with a strong easterly wind anomaly high over the tropics. This interaction happens every few years and has actually brought colder winters to Europe and the United States in the past.

Either way, it looks as if we might be in for a torrid time, yet the Observer only expresses concern in terms of rising energy bills and the ability of people to pay. There is no mention of the likely knock-on effect on the availability of gas supplies, and the possibility of electricity outages directly linked to severe weather.

A similar paradox is seen in an earlier piece by Emily Gosden in The Times which – at last – addresses the issue of gas storage, pointing out that a lack of gas reserves has left Britain unnecessarily exposed to a supply crisis.

There is very little new in the piece that hasn't already been covered in this blog, the interest being that the mighty Times is at last catching up, in pointing to the importance of the subject. But it concludes with a comment by Clive Moffatt if the Gas Security Group, saying:
If we have a combination of factors: a cold winter, high Asian demand, some technical problems - all of that creates a situation where we are desperately short and have no fallback and are waiting weeks for LNG ships that get turned around and sent to Japan. Then a situation could arise where industry faces the prospect of having gas supplies terminated.
If we take into account the Observer comments about the possibility of a severe winter, and bear in mind that Asian demand may well remain high, all we need are some unexpected technical problems and the risk of power outages soars to the top of the list. In fact, if the winter is sufficiently severe, excess gas consumption alone could bring our generation capacity to the brink.

On that basis, instead of the anodyne title of Gosden's piece, with it consigned to the depths of the business pages, the headline should have focussed on coming power cuts, elevated to the front page.

Turning to the Telegraph's offering – written by Ambrose Evans-Pritchard – we see the usual (for the paper) emphasis on Russian behaviour, with a suggestion that 25 billion cubic metres of gas is being withheld, pending resolution of the Nord Stream 2 regulatory issue.

But, since Nord Stream 2 is clearly not compliant with the letter and spirit of EU law – notwithstanding that the pipeline has been caught by a retrospective law change – it is extremely unlikely that Russia will release the missing gas. That would mean that Europe too would be facing a severe winter with inadequate reserves – unable or unwilling to help out the UK if it got into trouble.

However, there is also a suggestion that Russia's Gazprom may itself be in difficulties, after running down investment in drilling and exploration. Its Cenomanian fields in Western Siberia date back to the 1970s and are in terminal decline, making it difficult for the company to satisfy its own internal demand.

Russia, we are told, needs to refill its own depleted inventories. Stocks were just 25 billion cubic metres in late June, short of the 75 bcm deemed necessary for the long winter. Gazprom cannot single-handedly balance the huge European market. It certainly cannot quickly replace the 40 bcm slide in Dutch output from the Groningen fields over the last five years, as well as service the growing demand from its Asian customers.

Just to confuse the issue, though, Reuters is citing a Kremlin spokesman, reported by the Interfax news agency, who says that Gazprom is ready to boost gas sales to Europe, "because our consumers in Europe are our main partners".

Whether this is just posturing, or a genuine offer, is impossible to tell, but the fact remans that Russia has shown increasing reluctance to send gas to Europe via its Ukraine pipelines. Thus, any offer to boost supplies could still be contingent on regulatory approval of Nord Stream 2.

Thus we have a grand paradox. On the one hand, the UK is so perilously situated that all that stands between it and blackouts this winter is the hope of mild weather, in the context of early meteorological predictions suggesting that we're at risk of severe conditions. On the other hand, we have the media downplaying this threat, in preference to following an artificial crisis on forecourt fuel supplies.

It might be suggested that the media is holding off, to avoid public alarm, but this is hardly credible given its willingness to stoke up fears of fuel shortages. Maybe, because the threat of power outages lies in the future, the media is taking the view that the scare in the hand is worth two in the bush. It can always move back to the gas supply issue when its appetite for petrol station queues is sated.

This, however, should not simply be a matter of passively recording (and exploiting) events. If there is a high risk of power outages this winter, then people should be warned so that those who can are able make preparations – even if it is simply a matter of acquiring LED torches and making sure they are fully charged.

More to the point, with the Telegraph editorial proclaiming that "Britain is heading towards a winter of crisis", and "the Government needs to get a grip", we need to hear from ministers what preparations they are making – everything from ensuring that hospitals have enough functioning backup power, to gearing up (and funding) social services departments to ensure vulnerable people will be cared for.

For every one of the recent crises so far, the government has been on the back foot. But the prospect of the lights going out this winter (and much else) is too important to be left to a last minute, panic reaction.

Also published on Turbulent Times.