One of today’s most important, and weirdly under-reported, news stories is the economic crisis that threatens Great Britain and, more broadly, Europe. Its most striking current manifestation is a food shortage in the U.K.
Acute food shortages were feared last night after high gas prices forced most of Britain’s commercial production of carbon dioxide to shut down.
Emergency talks were being held between government officials and food producers, retailers and the energy industry….
The closure of two fertiliser plants in northern England and others in Europe has left the food and drink industry facing a shortage of carbon dioxide, which is a byproduct of fertiliser manufacturing. The gas is critical to the production and transport of a range of products, from meat to bread, beer and fizzy drinks.
The fertilizer plants shut down because of sky-high energy costs:
Gas prices in Britain hit record highs this week on fears of energy supply shortages in the winter.
CF Industries, an American manufacturer of agricultural fertilisers, said on Wednesday that it was halting operations at its sites in Billingham, Teesside, and Ince, Cheshire, because of high gas prices. The two sites produce about 40 per cent of Britain’s fertiliser needs and account for 60 per cent of domestic production of commercial CO2. Sites in Europe are also halting operations.
The CO2 shortage piles further pressure on a food sector already struggling with a shortage of haulers. Companies have warned they may have to cut back the range of products on supermarket shelves in the run-up to Christmas.
Nick Allen, chief executive of the British Meat Processors Association, said the CO2 shortage spelled a mounting animal welfare crisis, warning that more than 200,000 pigs would soon be crammed onto farms because farmers had been unable to send them to slaughter.
“It’s the most awful situation to find yourself in,” Allen said. “For these plants to be allowed to close overnight and land us with this problem, I find that a little bit shocking.”
They should be forced to operate at a loss!
But the threat goes far beyond food-related industries: Mounting fears of a 1970s-style three-day week as Britain’s energy crunch deepens. Subhed: “Rocketing power prices and a gas storage crisis threaten the recovery and leave the UK at the mercy of Russia’s Vladimir Putin.”
British manufacturing leaders fear an industrial collapse over the winter as spiralling gas and electricity prices overwhelm the country’s energy defences.
Wafer-thin gas reserves have left the British economy almost uniquely vulnerable to an extreme global supply squeeze, and dangerously reliant on cross-Channel interconnectors that may be curtailed if Europe itself faces power blackouts and serious industrial stoppages.
Andrew Large, the outgoing chairman of the Energy Intensive Users Group, said: “It is potentially catastrophic. We’re already seeing plant closures at a time of year when the weather is still warm and domestic heating is low. Fast forward two months and this could be an acute crisis.”
Natural gas prices are through the roof:
High energy costs are a dire threat to the British economy:
The cost squeeze threatens to abort the economic recovery just as the furlough scheme winds down and fiscal stimulus fades. In a worst case scenario it could lead to systemic havoc akin to the industrial paralysis and candle-lit evenings endured in the 1970s, something that no government or prime minister can survive.
[Clive Moffatt, a gas consultant and former adviser to the Government on energy security, said:] ““We could easily see a three-day working week. The Government has been playing dangerous games with the grid and has allowed a situation to develop that is outside their control. It’s terribly depressing.”
Gareth Stace, director-general of UK Steel, said power prices had already reached “extortionate” levels and was forcing a partial suspension of operations across the sector. “Even with the global steel market as buoyant as it is, these eye-watering prices are making it impossible to profitably make steel at certain times of the day and night. The situation gets more urgent each and every day,” he said.
The energy crisis is not limited to Great Britain:
Europe is facing its own problems. The Norwegian fertiliser group Yara is curtailing output of ammonia, which relies on gas as a feedstock. Richard Ewing from ICIS said the dominoes are likely to fall across the Continent as far as Ukraine, with producers switching to the US wherever possible. Abundant shale gas in Texas, Pennsylvania, and the Dakotas means that locally consumed US gas costs a quarter of European levels.
Europe’s taxes on carbon are a substantial part of the problem:
A surge in European carbon prices to €60 a tonne – shadowed in the UK with an extra £18 premium – has compounded the shock and accounts for a fifth of the rise in electricity costs. This is now leading to open political revolt in Spain, Poland and other EU states. The European Steel Association said last week that the bloc risks being priced out of the competitive global market.
Mr Large said it is becoming a question of manufacturing survival in this country. “The UK has the most expensive industrial energy in Europe. We are running the very serious risk of meeting our carbon targets by deindustrialising the British economy,” he said.
Which would be fine with the environmental lobby. Meanwhile, Vladimir Putin is naturally taking advantage of the situation:
Thierry Bros, former gas strategist at the French economy ministry and now at Science Po in Paris, said: “Mr Putin relishes teaching the Europeans a hard lesson for pietistic grandstanding on their green deal. Brussels is talking day and night about dirty ‘fossil gas’, and the Russians are pissed off.
“They are saying to Europe: ‘you don’t want our ‘fossil gas’? Well, see what happens when you don’t get it’. This is purely geopolitical. They normally push 55bn cubic metres a year and this year it is running at 40bn cubic metres. That is what is missing from the European system.”
The root cause of the problem is Europe’s commitment to “green” (i.e., expensive and unreliable) energy.
Mr Moffatt said the British Government had failed to come to terms with the implications of greater reliance on intermittent renewable power, especially since it was also phasing out coal and running down nuclear power.
It is fitting that the current crisis began when the wind stopped blowing in the North Sea, leading to a spike in demand for natural gas. But the problem is inherent: wind turbines and solar panels cannot fuel the world. The delusion that they can do so has led most European countries (France is a notable exception) to fail to provide adequate dispatchable sources of power: nuclear, hydroelectric, coal and natural gas. It remains to be seen whether the Europeans will correct this fundamental policy error before it is too late.
STEVE adds: You don’t need to read German to figure out that this magazine cover is saying.