• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Blair Faces the Heat Over Rising Gas Prices

Posted on: Thursday, 24 November 2005, 12:00 CST

By CAROLINE GAMMELL

The Prime Minister came under fire yesterday over escalating gas prices and fears of a fuel shortage this winter. Tony Blair conceded that the country faced 'difficulties with gas prices' but insisted the energy industry was doing its 'level best' to meet demand.

And he claimed it was not a problem that 'lies within the remit of Government itself to resolve'.

Mr Blair went on the defensive as the price of wholesale gas hit its highest level for eight months.

Prices have surged both for 'spot' gas - for immediate supply - and for deliveries until next March.

According to Spectron Group, a marketplace for energy users, the spot gas price rose by a third on Tuesday to a record pounds 1.70 a therm - a fivefold increase in three weeks.

The hike followed warnings from the Met Office that the UK could be on the brink of a lengthy cold spell.

Yesterday, Tory leader Michael Howard claimed the failure to guarantee supplies showed the Government was 'on its skids'.

At question time he told MPs, 'Four weeks ago the Leader of the House (Geoff Hoon), when asked if the Government could guarantee energy supplies to business and domestic customers this winter, said, 'Yes, they can'.

'Does that guarantee still stand?'

Mr Blair replied, 'Of course there are going to be difficulties with gas prices because of the cold winter we are likely to have.

'But, as the energy (suppliers) have made it absolutely clear, they are doing their level best to make sure that demand is properly met.'

Mr Blair said there was no problem for domestic users but potential difficulties could arise for 'high-level industry users'.

'The only way of dealing with that is to make sure the industry itself can get as much demand as possible from abroad.

'We are not the only country with this problem, but it is not a problem that lies within the remit of government itself to resolve.'

Mr Howard said the Met Office had warned months ago about the likelihood of a cold winter.

'The CBI and others have been warning for months of possible gas shortages. Why has the Government ignored them for so long?

'This is a Government on its skids and you have lost your grip and are quite incapable of dealing with the challenges the country faces.'

Mr Blair said, 'What we are doing is doing our level best to make sure we get additional infrastructure that allows us to import more energy.'

Since becoming a net importer of gas last year, the UK relies on fuel being imported via a pipeline from Belgium or liquefied natural gas (LNG) being brought in by tanker.

But wholesale gas prices in Germany currently stand at around 50p, leading suppliers such as British Gas to claim that the UK consumer is getting a raw deal.

British Gas said, 'There is a need for a much more independent and separate transmission system on the Continent, so that supply and demand are much more closely aligned and wholesale prices in the UK are more realistic.'

In September British Gas announced it was putting up bills by 14.2% - equivalent to pounds 96 on the average annual bill - and rivals Scottish & Southern Energy, npower, Scottish Power and Powergen have followed suit.

Projects being undertaken to ease pressure on UK gas supplies include the construction of the Dragon liquefied natural gas terminal at Milford Haven, South Wales, the revival of an LNG terminal at Canvey Island, Essex, and a terminal in East Yorkshire, which connects the UK to Nor- way via the Langeled pipeline - the longest undersea duct of its kind.

But many industry insiders believe fears of blackouts are unfounded as production can be ramped up from fields in the North Sea which are used specifically to meet peak demand.

Energy Minister Malcolm Wicks insisted the National Grid was 'awash' with gas.

He said the network had advised him that the situation with regard to spot gas prices was 'totally irrational'.

Source: Western Mail

More News in this Category