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Awash Or A White Wash?

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Only last Wednesday, after hectic trading on the spot markets that saw gas prices surge 40%, we were all reassured by the Government via Energy Minister Malcolm Wicks that "the National Grid was "awash with gas". "

Further more Trade and Industry Secretary Alan Johnson told us "Those that predicted that the lights might go off this winter unnecessarily worried some very vulnerable and elderly people."

Instead, Tony Blair prefers to say that the country faces "difficulties with gas prices" due to the impending cold winter and that while the energy industry was doing its "level best" to meet demand, it was not a problem that "lies within the remit of government itself to resolve".

So there you have it: the only problem is crazy, unjustifiable prices and government ain't responsible for that, so that's okay then. After all, if this were true, the problem would go away as soon as the market woke up, which, inevitably would be sooner rather than later, and even if they didn't , well, what can gov do?

Let's just suppose this is right. Let's just imagine that this is all a bad nightmare we'll all wake up from. Let's imagine there is no way the government is at fault and that nothing bad will happen. What would be your next move if you were in No.10?

Me? I'd go on another holiday, preferably using some rich friend's facilities, donating to charity all the money I'd saved of course. Sip sangria. Kick back some. You get the picture.

I mean, if I thought something bad was going to happen, that it was more than just mad markets, well, I might get a little concerned. Might have to start making a few moves. Look to shift the blame. But that clearly, as we have been told, is just not necessary, right?

BP, Shell and other North Sea oil and gas producers are under investigation by the Government over claims that they may have been profiteering from the gas crisis by withholding supplies. Telegraph, 28/11/2005


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It's possible that they have withheld a bit of gas but the fundamental problem is depletion of North Sea gas resources.

It's like arguing whether there has been 50 inches of rain or 51. A flood is likely either way and you've got a problem.

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There is little doubt in my mind that storage will be depleted before the winter’s end and daily supply will fall to little more than beach and Interconnector of maybe 320-350 mcm/d which would result in most if not all daily metered users not being supplied through much of February or March, that’s the worst case scenario but even at such low levels non-daily metered customers should be okay even without adjusting their demand. I don’t think peak electricity demand could be met under that scenario though since we would lose most of the 22GW of CCGT capacity.

The only way to avoid that situation is for the weather to be very warm or for demand to be significantly reduced starting now so we don’t use all storage in the first 2/3 of the winter leaving nothing for the end of winter, an average draw down on storage of 20-30 mcm/d.

It’s all in the assumptions though, using their (National Grid Transcos) optimistic average 303 mcm/d beach, 13 mcm/d LNG and 42 mcm/d Interconnector expectations they show how almost no demand reduction is needed for an average winter (convenient!) and apparently manageable reduction under colder conditions. If those numbers actually end up more like 300, 4 and 32 then their base case is down by 22 a day which is the amount we need to reduce consumption by rather that the current tactic of drawing down heavily on storage. Better to make small demand reduction throughout the whole winter than no reduction for the first 2/3 and large reduction for the remaining 1/3.

Small sacrifice today to avoid a large sacrifice later.

The way we're going now it will be impossible to get through Feb/Mar without major disruption.

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  • 301 Brexit, House prices and Summer 2020

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