Families face paying 3p extra for a litre of petrol by Christmas – on top of higher energy prices – after two catastrophic incidents threatened winter fuel supplies.
The North Sea’s most important oil and gas pipeline – carrying 40 per cent of mainland Britain’s crude oil from the North Sea – had to be shut down after cracks were found.
As a result, the price of a barrel of Brent crude rose to $65.56 (£49.23), a level not seen since the summer of 2015.
The North Sea’s most important oil and gas pipeline – carrying 40 per cent of mainland Britain’s crude oil from the North Sea – had to be shut down after cracks were found (stock image)
Last night, the RAC warned the disruption could push the cost of petrol and diesel at the pumps up by 3p per litre.
Yesterday there was also an explosion at a major gas transfer station in Austria – the main point of entry for Russian gas into Europe. In the wake of the blast, UK gas prices hit their highest level for six years, threatening higher bills this winter.
The double blow comes as Britain goes through a cold snap, pushing up demand for domestic heating.
Ineos, which operates the Forties pipeline in the North Sea, said it had been forced to shut the network for several weeks to repair a hairline fracture found during an inspection close to Aberdeen last week. Simon Williams, of the RAC, said: ‘This is very bad for motorists who are already having to endure the highest prices at the pumps for three years. This really isn’t what drivers need at Christmas when many are travelling longer distances to spend time with family and friends.’
The average price of unleaded is already 120.76p per litre, compared with 114.33p in July. Diesel sells for an average 123.21p a litre, up from 115.02p in July.
The predicted 3p rise would increase the cost of filling a 55-litre, family-sized car to £68.07 for petrol or £69.42 for diesel.
Meanwhile, experts said the explosion in Austria would not immediately lead to higher gas bills, but could filter through to worse tariffs in the new year. Italy has declared a state of emergency due to concerns over the security of its supply as a result of the explosion at 9am yesterday, which killed one and injured 21.
It appeared to be caused by a technical fault and operator Gas Connect Austria could not say how long it would take to get it back online.
Mike Mahoney, of energy research firm Cornwall Insight, said: ‘This could put some of the suppliers under pressure. It can cost them a lot more to see their commitments through and if people are looking at tariff increases in the new year, this might feed into it.’ Analysts predicted the problems could lead to ongoing high wholesale prices.
Massimo Di-Odoardo, of Wood Mackenzie, said: ‘The European gas market seems to be going through a perfect storm.’
Why we’re so vulnerable to energy shocks
Analysis by David Wilkes, the Daily Mail
The huge Forties pipeline was opened in 1975 to transport oil from BP’s Forties, the UK’s first major offshore oil field, deep under the North Sea.
Now the 235-mile system links 85 oil and gas fields in the central and northern North Sea and several Norwegian fields on behalf of 21 companies.
Last year, it carried an average 445,000 barrels of oil and 3,500 tons of raw gas a day, and delivered 40 per cent of the UK’s North Sea oil and gas production.
The huge Forties pipeline was opened in 1975 to transport oil from BP’s Forties, the UK’s first major offshore oil field, deep under the North Sea
Given such volumes, it is little wonder that the prospect of the historic pipeline being closed for up to three weeks while a crack is repaired has led to consternation.
This is part of what analysts have called a ‘perfect storm’ that threatens our ability to meet our energy needs.
As well as the shutdown of the pipeline, the explosion at a natural gas hub in Austria and the cold weather in Britain (which has pushed up demand for gas for domestic heating) has highlighted our vulnerability to sudden falls in energy supply.
Critics have long held that the UK does not have large enough capacity for storing gas, widely regarded as vital insurance against restrictions in supply.
Storage facilities can be either large containers or old fields under the ocean into which gas can be pumped. Gas is stored in the summer during times of low demand and is then available for use when consumption rises in the winter.
Other countries including the Netherlands and the United States have huge gas storage facilities.
In Britain, however, our biggest storage is in the process of being closed down.
In June, Centrica, the parent company of British Gas, revealed its plan to shut down Rough, a natural gas storage facility located 18 miles off the coast of Yorkshire.
The reason given was that it was no longer viable because of safety concerns, with Centrica ruling out a refurbishment costing ‘hundreds of millions of pounds’ because it would be too expensive. Rough’s total closure would wipe out 70 per cent of the UK’s natural gas storage capacity although it does still have some gas reserves which could be extracted to help the system cope with a sudden drop in demand.
However, it is of limited use now that the used-up gas is not being replenished. The lack of storage has heightened our reliance on imported gas to make up for falls – such as that caused by the shutdown of the Forties pipeline – in our own domestic production.
Around half of Britain’s gas supplies come from our own North Sea gas fields. The remainder is imported from a variety of sources including pipelines linking us with Europe. The principal sources of these imports are Norway, followed by the Netherlands and Belgium.
We also import liquefied natural gas (LNG) shipped in from around the world.
Storage facilities can be either large containers or old fields under the ocean into which gas can be pumped
But these are links that, as we saw yesterday, can also be vulnerable to disruption. The explosion at Baumgarten in Austria, a major hub for Russian gas imported into Europe, caused significant supply problems for countries such as Italy and Slovenia. Britain was not immune from the subsequent spike in gas prices.
We have also been affected by the rising price of LNG, which is currently in high demand in Asia as China and other countries seek to switch to gas-fired heating from using coal.
Last night Wayne Bryan, of analysts Alfa Energy, said: ‘At the moment, about 9 million cubic metres (mcm) per day is being withdrawn from Rough. Before it was about 30 to 40 mcm per day. So we have an over-reliance on import.
‘If we had a fully working Rough we would not be in this position. If Rough was available we would not be held hostage for such high price imports.’
A recent Department for Business report on our gas supply said: ‘The GB gas system is undergoing a transition as domestic supplies decline… Diversity rather than domestic supply has become the basis of our security of supply.’
With so many threats to our energy security, diversifying supply may prove to be a lot less reliable than traditional gas storage facilities.