LONDON (FT) - Centrica, owner of British Gas, has warned of soaring prices caused by a global supply crunch that could raise household bills and force energy-intensive businesses in the UK and Europe to curb activity this winter.
Natural gas prices are already at record levels for the time of year, trading at about five times their level of two years ago. There are fears that European countries could face supply issues this winter when demand is strongest because gas providers have been unable to fill storage during the summer.
Cassim Mangerah, who runs energy trading at Centrica, told the Financial Times that a prolonged or particularly cold winter was likely to spur prices higher, leaving some energy-intensive companies little option but to curb production.
“We haven’t seen a price situation like this before. If you can’t attract supply the only alternative is to cut demand to balance the market,” Mangerah said. “If we do see a supply crunch this winter the other way to balance the market is through economic activity.
If prices are really high then some gas-dependent businesses in the UK and Europe may simply decide not to produce.” The warning raises the prospect of a fraught winter if high prices force industries to restrict production or close factories against a backdrop of a lingering pandemic and fears of a renewed surge of coronavirus cases this winter.
Tom Marzec-Manser, an analyst at energy consultancy ICIS, said the supply situation had got “worse rather than better” for the UK and Europe over the summer.
“That is why prices keep surging,” he said. “Industrials turning down production within the UK and European Union is not inconceivable, though if it happens it may only be for a short time right at the peak of winter demand.
Natural gas, which is widely used in electricity generation as well as heating and industrial uses, has been in high demand globally in 2021. A prolonged winter in Europe and Asia drained storage levels, while countries are increasingly prioritizing the use of gas over coal because of its lower carbon emissions when burnt.