UK government knew about energy crisis 7 years ago

With a long, cold winter looming and the rising cost of gas and electricity bills, the nation is wondering just how effective the recently released aid package from the Government is going to prove, and how hard fuel poverty is going to hit them.

This new term describes the situation of anyone who will have to pay more than a tenth of their income on heating their homes this winter. In the last year, electricity and gas prices have reached record highs, going from £942 in the average household at the start of 2008 to more than £1,400. Furthermore, energy companies have warned that a harsh winter could push up gas prices even more as they do not have enough gas in storage to cope with bad conditions.
The outlook for the end of 2008 does indeed look bleak. But this week the Government introduced their energy aid package which resolves to help the estimated 5 million who will suffer from fuel poverty.

The Government have invested £910 million into this plan, which consists of giving pensioners and low income households free cavity and loft insulation to provide long term energy and cost saving benefits. Everyone else will be entitled to top half price energy saving measures, and cold weather payments for the most vulnerable have also been increased from £8.50 per week to £25. For the 500,000 poorest households, there will be a freeze on this year’s bills.

Each of the biggest UK power firms has been made to contribute £50 million towards energy saving funds but many critics of the plan are already predicting that the companies will pass costs onto customers through augmented prices. With the saying that the customer always pays ringing in the general public’s ears, the Government admits that they are powerless to prevent energy firms making their customers pay for this contribution.

The major power firms’ motivations were further highlighted last week when chief executive of E.On, Mark Owen-Lloyd joked during an Ofgem conference that in a worst case scenario, higher gas prices would “mean more money for us.” Mr Owen-Lloyd’s shocking insensitivity sparked outrage across the country, leading some to question why Gordon Brown hasn’t opted to impose a windfall tax on the largest energy companies in order to ease prices.

The Government’s avoidance of enforcing a windfall tax has led to criticism from the gas and electricity watchdog Energywatch, who commented that “lack of political will to tackle fuel poverty is not just disappointing, it approaches negligence.”

However the aid package has won support from much of the press. House insulation has been described as a small, but “sensible” measure that aims to tackle the problem of energy saving, rather than relieve the symptoms of it. As UK housing stock is amongst the least efficient in Europe, cutting down on the amount of heat lost through flimsy constructions is a vital social contribution in cutting emissions of greenhouse gases.

The Times praised the Government’s resistance in choosing the easy option of forcing a windfall tax on energy firms. Acknowledged as the right decision, it said major tax changes should not be brought about under pressure. Adding to this opinion, The Daily Mail predicted that a windfall tax would have distorted the market and driven big businesses abroad.

Whether these small and sensible measures will benefit the thousands of elderly in the North who are the most at risk this winter remains to be seen. The PM’s opposition have questioned whether these ecological and cost-saving actions will actually make a difference to the millions of struggling families and have accused the PM of being out of touch with the nation’s most basic needs. Meanwhile, it is up to the main UK energy companies just how harsh this winter will be for their customers.

Source - Debt Management Today

UK gas could soon rise 40% and electricity by 20%

Fresh warnings have emerged that oil prices could go even higher than Friday’s record close and domestic gas prices in Britain may surge by 40% on the back of the trend.

Oil saw its biggest-ever one-day price jump on Friday with a leap of more than $11 a barrel to yet another all-time high of $139.12, meaning that the cost of the fuel has risen sevenfold since 2002 and doubled in the past 12 months, raising fears of both inflation and recession in oil-consuming nations.

Website theEnergyShop.com warned over the weekend that gas prices to retail customers could soon rise 40% and electricity by 20%. On Friday, forward wholesale gas prices rose 5.3%, meaning they are up 76% in the past year.

Joe Malinowski, founder of theEnergyShop.com, said wholesale prices for gas have risen above retail prices.

“The last time wholesale gas prices broke above retail gas prices was two years ago, in June 2005. In the following 18 months energy bills rose by a record 47%. A very similar thing is going to happen this time around, except that the money value of the increase is going to be even higher,” he said.

Prices look set to open higher this morning after Mohammad Ali Khatibi, Iran’s representative at the oil producers’ cartel Opec, forecast yesterday that prices would hit the $150 a barrel mark by the end of summer.

Similarly bullish comments came from Shokri Ghanem, head of Libya’s National Oil Corporation, who said there were no moves within Opec, which pumps a third of the world’s oil, to increase supplies further. “I think it [the oil price] will go higher. That is a trend that will continue for some time. The easy, cheap oil is over, peak oil is looming,” Ghanem said, referring to the theory that world oil supplies may be about to peak and start declining.

Ghanem added, however, that oil prices were rising at the moment for other reasons, such as speculation and concern over political tension in the Middle East.

Energy ministers of the Group of Eight rich nations failed over the weekend to back Gordon Brown’s demand to urge Opec to increase supplies of crude oil.

Instead the ministers, meeting in Japan with non-G8 countries China, India and South Korea, which jointly with the G8 consume two-thirds of the world’s oil, talked of the need to promote energy efficiency.

“We will continue to vigorously promote policies and measures for improving energy efficiency,” they said.

Surging oil and food prices over the past couple of years have pushed up inflation in many countries at a time when economies are slowing, preventing central banks such as the Bank of England and European Central Bank from cutting interest rates to head off recession.

Governments around the world are struggling with street protests and even riots against rising food and petrol prices. In Britain, pump prices are already at record highs, leading to pressure on the chancellor, Alistair Darling, to scrap a planned 2p a litre fuel duty rise scheduled for October - even though that would make little difference to prices. Diesel is already more than £1.30 a litre in many parts of the country.

Airlines are warning that they cannot make money with fuel prices at these levels and many expect to plunge into losses. Ryanair boss Michael O’Leary has predicted that several European airlines will go out of business and US carriers have signalled they are to start charging for baggage.

The aerospace group Boeing warned yesterday that orders for its new planes were “on a knife edge”.

However, the US energy secretary, Sam Bodman, acknowledged at the weekend that the Bush government was powerless: “There are relatively few things we can do short term.”

The German economy minister, Michael Glos, said yesterday he was worried at the rapid rise in oil prices and wanted greater international cooperation on the issue.

Source - TheGuardian