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  • November 15th, 2013

Gas Prices Could Rise Due To Low Reserves

A Government decision not to support additional gas storage could lead to a hike in energy invoices if the UK is hit by a cold snap this winter.

Gas prices could rise this winter if the national supply runs short during another cold snap, an energy expert has warned.

An industry analyst said that a “perfect storm” last winter of extreme weather and the shutdown of two major pipelines caused prices to double.

And that could happen again because the Government has refused to support the storage of more gas.

“It foreshadows things to come,” he said.

“The situation in terms of the risks will only get worse as North Sea production runs down and demand rises.

“That’s the double whammy. And if you don’t have more storage that translates into real vulnerability.”

The UK currently stores enough gas for 13 days of supply however Germany has reserves to last 69 days, in case there is a problem with the supply from countries such as Russia.

Storage companies buy up cheap gas in the summer, then release it over winter. The effect is to stop prices soaring.

A report by an energy consultancy, commissioned by the UK Government, showed subsidies to encourage investment in more storage could save consumers almost £1bn over 10 years.

It examined four scenarios, three of which showed a net reduction in gas prices.

The UK stores gas in huge tanks – but Germany has five times more.

Energy Minister Michael Fallon rejected subsidies based on the one scenario to show an increase in costs. He also ignored long-term savings, making the costs look worse.

“I would have had to be persuaded that this was a subsidy worth paying. I don’t think it is worth it.”

Three projects to increase storage capacity have been shelved in the wake of the decision.

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