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Gas price rise: Government considering loans for energy firms

News / Mon 20th Sep 2021 am30 07:26am

THE government is considering offering emergency state-backed loans to energy companies as firms battle to stay afloat amid surging gas prices reports the BBC.

Business Secretary Kwasi Kwarteng is holding crisis talks on Monday morning.

Smaller suppliers face ruin as price hikes have made their price promises to customers undeliverable.

The process for dealing with failing firms is under pressure as adopting customers has become unattractive for surviving companies due to price rises.

The loans are expected to be offered to encourage firms to take on customers.

Wholesale gas prices have risen by 250% since January after a cold winter put pressure on Europe’s supplies, running down levels of stored gas.

Increased competition for liquefied natural gas, particularly from countries in Asia which also experienced cold weather, has added to the pressure on prices.

Boris Johnson, who is in New York for a UN General Assembly meeting, told reporters: “We’ve got to try and fix it as fast as we can, make sure that we have the supplies that we want, make sure that we don’t allow the companies we rely on to go under.

“We’ll have to do everything we can, but this will get better as the market starts to sort itself out as the world economy gets back on its feet.”

Mr Johnson said he was “very confident” in the UK’s supply chains.

The prime minister said the supply problems stemmed from the economy around the world waking up after pandemic lockdowns, “like everybody going back to put the kettle on at the end of the TV programme”.

Nick Butler, visiting professor and chair of The Policy Institute at King’s College London, told the BBC’s Today programme that a reduction in supply from the United States, Russia and the North Sea was playing a part, as well as limited storage facilities for gas in the UK.

“The government has taken their eye off the issue of energy security,” he said. “All of the focus in Whitehall has been on climate change. For the moment, we’re very reliant on oil and gas and when gas gets short in the world market, it hits back here.”

One senior executive at one of the UK’s largest energy companies described an estimate that 10 energy companies would survive this as “optimistic”.

Several energy suppliers are batting to stay in business, with the UK’s sixth largest energy company Bulb seeking a bailout to stay afloat.

Four other smaller firms have ceased trading in recent weeks, and four more are expected to go out of business next week.

The proliferation of new energy retailers, set up to challenge the bigger players, had been considered by past and present governments as a triumph of competition in a competitive market.

The bigger energy providers have the financial resources to take out insurance – or hedge – against the risk of a spike in energy prices. Smaller players have been unable or unwilling to spend the money to guard against a price shock.

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