Gas: They Want Our Bacon!

It has just been released that the UK came within 6 hours of seeing itself deprived of its eggs and bacon as gas supplies across the entire country depleted to danger levels on March 22nd. That meant that had it gone below that level and had the country not managed to get that supply flow open again, there would have been severe gas-supply cuts to many households in the country. But, it’s not only why that was allowed to happen that springs immediately to mind, but we might also wonder why that wasn’t revealed by the National Grid (that keeps data on the supply of gas in the UK) to the public before a few days ago.

Contrary to what has been reported recently, new investigations have just been released to show that the energy suppliers of the UK were in actual act withholding gas supplies from the country and have been accused of market manipulation. Prices have soared over the past two years for gas.  Wholesale gas, which supplies both households and also electricity generation (so there is a knock-on effect from gas to electricity) are now at 70p per therm. That is a fall, but it’s still cooking up a storm. That price is way beyond the previous highs that we have seen. This time last year, prices stood at 57p. May 2009’s price amounted to a mere 28p per therm. Some are saying that energy produces are holding back on the goods in an attempt to control the market and up the prices.

The Liquefied National Gas terminal near London (Isle of Grain site) is used by BP and other major suppliers such as Centrica. On the very same day that the British ‘cuppa’ nearly ran dry because the country could only boil six hours’ worth of kettles, that terminal had a reserve of 40%. Similarly, the Liquefied National Gas site of South Hook (Wales), supplied by Total and ExxonMobil, had a reserve on the same day of 52%. Prices have now fallen to 70p a therm, but on March 22nd they reached the record high of 150p per therm. Were they in cahoots? Have they been manipulating the public, the state and the market?

Energy suppliers have issued statements that prices in the UK may have to rise again to cover increasing costs in the industry. The British Department of Energy and Climate Control is now threatening those suppliers with a state intervention in price control to maintain supplies to British customers, unless the industry gets its act together. BP has already been landed with a fine amounting to hundreds of millions of dollar in the US and some are calling for the same sort of action in the UK in an attempt to halt market manipulation of prices. BP was fined in 2007 and had to pay out the hefty sum of $373m to the US Department of Justice (for environment crimes and fraudulent trading agreements). Between April 2003 and February 2004 they were found to have fixed prices and manipulated the propane market. It was the highest fine ever imposed by the Commodity Futures Trading Commission (CFTC) in the US.  It was a sign back then that the Commission and the US Department of Justice were not prepared to accept market manipulation. The British government has not been so categorical and it looks like energy suppliers have been cooking the market price in a fry-up of greasy manipulation in the UK.

However, it has already been brought to light that three of Europe’s largest oil exploring companies (Royal Dutch Shell Plc., Statoil ASA and BP Plc.) are already under investigation from the European antitrust regulators of the European Commission for price collusion, causing prices to inflate. The British government has stated that oil companies will need to cooperate to the full with the European Commission in the investigation over price-fixing. They have allegedly fixed prices and distorted the market since 2002. BP has already posted a first-quarter profit in the region of more than $4 billion this year, earning more than 30% over what experts said they would. Not bad for one of just many of the companies that has been withholding gas from the UK in a bid to get more money and boost prices in an already over-inflated market. What will they be asking for next? Suppose they’ll be wanting their cake and to be able to eat it. Let’s hope for all of us that the EU Commission hits them hard and that prices come back to where they should be!

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