Leave it to British wits to put to rest any notion that the
world's winter energy woes have been eliminated by the North American
natural gas boom. They let loose
Thursday, soon after Great Britain's largest energy supplier, British
Gas, announced a 10 percent price hike to go into effect on the eve of
the cold season. In what will go down as one of the great corporate
social media faux pas, the company invited customers to dialogue using
the hashtag #askBG on Twitter.
"Is it true that
the water fountains at British Gas HQ are filled by collecting the icy
tears of freezing children?" tweeted freelance animator Adam Proctor
(@fortsunlight). "Do the @BritishGas board prefer to bathe in £20 or £50
notes?" tweeted the creative ad agency, Don't Panic London. "British
Gas: Freeze pensioners, not prices," said one of the few mock ads that
did not contain profanity.
Things only got worse when U.K. Energy Secretary Ed Davey chimed in that he kept his heating bills down by wearing a jumper (British slang for a pullover sweater.)
This
unleashed a "#jumpergate" torrent, even though Prime Minister David
Cameron's spokesman tried to disassociate himself from his cabinet
member's comment. "Let them wear jumpers!" declared The
Independent newspaper. "We burned our jumpers last winter," tweeted Tara
Herman, an executive producer at The Guardian. "Perhaps the Tories can
donate some of theirs?"
The dark humor underscored a serious reality about what the International Energy Agency just two years ago suggested might be "the golden age of gas."
Unlike coal and oil, natural gas is difficult and expensive to
transport. So even though hydraulic fracturing, or fracking, has allowed
the United States to ramp up production quickly enough to overtake Russia as the world's leading natural gas producer, it won't directly warm homes across the pond this winter. (It may do so only indirectly, by continuing to cheapen U.S. coal enough to fuel record exports, much to the detriment of European Union goals to cut carbon dioxide emissions.) (See related quiz, "What You Don't Know About Natural Gas.")
In the Shadow of Plenty
Even
within the United States, where more than half of households rely on
natural gas for heat, consumers will be hard pressed this winter to
find any sign of the hydraulic fracturing gas bounty on their utility
bills.
Forecasters at the U.S. Energy Information Administration (EIA) see a 13 percent increase in heating costs this season for households that use natural gas.
Offering
some consolation, EIA points out that natural gas bills still will be
lower than the five-year U.S. average. And homes heated by natural gas
still will be significantly better off than the 6 percent of U.S.
households, primarily in New England and the Middle Atlantic, that still
rely on heating oil. For them, despite a slight drop in price from last
year, EIA's forecast is for an average winter heating bill of $2,046,
roughly double the cost of keeping warm for homes that use natural gas
($1,045.)
Several complex factors have contributed to
higher natural gas prices in the United States, despite the ongoing
fracking boom and high production.
Bottlenecks slow the movement of natural gas from remote fields to customers. (See related, "Space View of Natural Gas Flaring Darkened by Budget Woes.")
Home heating customers aren't the only ones lining up for natural gas;
both electricity generators and big industry customers are clamoring for
the same fuel, and there's only so much pipeline to deliver it. EIA
noted that chilly New England in particular saw "extreme price spikes"
in both natural gas and electricity during the winter of 2012-13 due to
pipeline constraints.
Unfortunately for the poor, higher
winter energy prices hit at the same time that U.S. budget woes have
sliced total funding for low-income heating assistance from $5.1 billion
in 2010 to $3.3 billion in the fiscal year just ended. The number of
households served declined about 19 percent, to 6.6 million, and the
average benefit was cut about 20 percent, to $401.
It
all comes at a time when more people are in tight financial straits due
to the sluggish economy, said Mark Wolfe, executive director of the
Washington, D.C.-based National Energy Assistance Directors Association,
which advocates for heating assistance for low-income families. "These
programs (heating assistance) were designed to deal with a much smaller
population of people in need," he said. "We have a lot people who are
out there living from paycheck to paycheck."
Out of Gas in the EU
In
Europe, which is continuing to struggle with its own economic recovery,
the factors affecting winter energy prices are even more complex.
British Gas, like another supplier, Scottish and Southern Energy (SSE),
which announced a winter price hike of 8.2 percent one week earlier,
cited higher distribution and wholesale costs, as well as the expense of
meeting government "green" energy regulations.
As its once-bounteous North Sea fields have aged, the United Kingdom's own natural gas production has fallen 60 percent over the past decade. The U.K.'s imports of natural gas from Norway via pipeline have risen significantly in recent years, but a number of outages and maintenance issues
have strained these flows. Norway's production is down by about 30
percent because of technical problems at Troll, its major gas field.
In
theory, European countries could tap into the natural gas is being
produced in abundance in the fields of Qatar and Algeria, both of which
have invested billions of dollars on facilities to super-chill the fuel
into liquefied natural gas (LNG) and send it by tanker ships to the
world market.
But LNG ships from the Middle East and Africa are turning their sterns to the European Union because they can gain far higher prices for the fuel by traveling to Asia and the ravenous markets of China and energy-strapped Japan.
Meanwhile,
continental Europe relies heavily on Russia for natural gas, much of it
delivered by pipeline through Ukraine. Analysts are debating whether a
continuing dispute between the Ukraine and Russia will result in a
reprise of the gas shortages and high winter prices that staggered
Europe in 2009.
But regardless of the outcome of this year's Ukraine issues, EU regulators are preparing an antitrust action against Russian monopoly Gazprom, charging it has hindered the free flow of gas across the continent and imposed unfair prices.
Open Grid Europe, Germany's leading natural gas carrier, warned about possible supply disruptions across Europe this
winter because many European countries were forced to delay
replenishing their stores because of a long, unseasonably late cold snap
last spring. "One cannot rule out the possibility of supply
restrictions occurring," it said, concluding Germany and neighboring
countries were most at risk. According to Gas Infrastructure Europe,
Europe's storage levels are at 81 percent capacity, 10 percentage points
lower than a year ago.
In the long run, the fracking
boom that began in North America might spread natural gas supply and
ease prices. The United States is moving forward with plans to build its
own LNG terminals to export gas. (See related, "With Natural Gas Booming, a Move to Send it Overseas.") And England and other E.U. countries hope to tap into their own underground shale reserves with fracking. (See related, "U.K. Dash for Gas A Test for Global Fracking.")
But both potential moves—U.S. gas exports and E.U. fracking—are steeped
in political controversy, so any significant increase in supply to the
global market is years away.
For this winter,
expectations are now high that the four other big U.K. energy suppliers
will fall in step with British Gas and SSE and raise prices. "If there
is one thing history has taught us, it's that the other four will likely
increase their prices by next month, as well," said Audrey Gallacher,
director of energy at Consumer Futures, a U.K. consumer watchdog.
And
the political fallout is likely to continue, as Britain's Labour Party
leader, Ed Miliband, recently promised that if his party wins the next
election it would freeze energy prices for 20 months. The pledge was
quickly labeled as a "con" by Cameron, who pointed out that no
government leader has the power to control world gas prices. But in a
country where the government tracks "excess winter mortality,"
and where thousands of deaths, primarily of the elderly, are attributed
to the cold, the issue is an emotional one, as British Gas learned in
its ill-fated Twitter chat. How well England weathers
the energy price storm will depend greatly on the weather. Long-range
forecasts are notoriously inaccurate, but Britain's upcoming winter is expected to be, like last season's, "colder than average."
Get out your jumpers.
(Related Interactive: "World Electricity Mix")
http://news.nationalgeographic.com/news/energy/2013/10/131018-no-freeze-on-winter-energy-prices/
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