Gas is suddenly all over the news. The run-up to CoP26 in Glasgow will focus on reducing CO2 so that the increase in the Globe’s temperature can be held at 1.5 degrees. Yet simultaneously manufacturers of fizzy drinks are complaining that they can’t get enough CO2. That apparently is because it takes gas to make it, and the gas price has gone through the roof. So we are trying to cut CO2 by a reduction in carbon fuels like gas; yet at the same moment an apparent shortage of gas means a price hike, and the end result is too little CO2. My ‘O’ level science is not up to it.
The wholesale price of natural gas has gone up by 600% through a variety of contributory factors. That means that the big gas companies who have the cash flow and sophistication to do so, laid off the risk using the futures and options markets and so continue to break even within the price cap set by the Government. However, the smaller and cut-price gas suppliers who have no such hedge are buying the product at a much higher price than they are charging their customers. (I am on an Avro contract at a very low price, which I know will have to increase when I find a new supplier). Discount shops only keep going as long as they can buy goods even cheaper from the wholesaler.
I have to admit that I have always found the whole idea of competition amongst utilities companies hard to understand. Gas, electricity and water all come through a wire or pipe into our houses. It is the same gas, electricity and water no matter who we are paying our bills to. The gas is manufactured and distributed by British Gas; all the ‘retailer’ is doing is marketing the product, and billing for it. The retailer’s margin simply comes from how cleverly they carry out that admin task (for example by billing for several utilities); and from how nimble they are at using the forward markets to protect themselves against untoward international price movements. On this occasion they seem to have got that bit badly wrong. What all of this means is that we need not fear for the supply - it will continue no matter who we pay our bills through. So if, like me, your ‘retailer’ has gone bust, the advice is to wait for further instruction from Ofgem the regulator, and for now you need take no other action.
The whole world of trade is a mystery to most of us. It is a shame that we will not be able to come to a formal trade agreement with the US in the short term. They are our biggest single trading partner and having an agreement over tariffs and so on would be a great boost to post-Brexit Britain. However not having any such agreement will not hamper our exports in any way. It just means that each deal has to be negotiated separately and taking into account tariffs payable. I am glad that we have sorted out the Airbus/Boeing dispute, and that flights to the US will restart in November. The PM and Foreign Secretary’s US trip has overall been a great success. America are our closest allies from a trade and diplomatic, military and economic standpoint; and it is vitally important that we should have as close a relationship with them as we can.
Much of the media-driven disquiet over gas, steel, international trade and so much more comes from the fact that these matters are so complex that it is hard for many of us to follow them. We get upset over a newspaper headline that our soda stream may not work next Christmas thanks to a shortage of CO2, without actually having much of an idea why. We politicians should spend much more time trying to explain these complex matters in everyday terms. Less hot air and Gas Gas Gas. More cool quiet explanation in plain straightforward English.