Price spikes in the global energy market are believed to occur during the cold winter months in the northern hemisphere, which is why their arrival is now alarming. This suggests that the current mini-crisis – which embarrassingly sees the UK shoveling millions to coal-fired power producers just ahead of the Cop26 climate conference in Glasgow – could worsen well in January or February.
As always in the energy market, it takes a combination of factors to produce a price surge of the degree seen in the UK on Monday – record highs for electricity prices in the near term. Wind speeds have been low in northern Europe for most of the year. UK gas stocks are low. And a few factories were taken offline for repairs at a bad time.
On international markets, the economic recovery in China and parts of Asia has accelerated demand for LNG (liquefied natural gas). American shale gas producers, now under political pressure to curb hydraulic fracturing, are no longer producing the same volumes as before. Russia, some say, is underproducing gas ahead of the opening of the Nord Stream 2 pipeline to Germany. The UK is certainly not alone in experiencing the storm in the fossil gas market.
A few factors could be reversed – wind speed, for example – to relieve the immediate pressure. But one can also diagnose an overdependence in the UK on gas as a source of fossil fuel “transition” towards net zero. There isn’t a lot of resilience in the system with so many nuclear power plants set to go offline this decade. The Bank of England might even be forced to take note: we are now at the point where year-over-year increases in consumer energy bills are having a significant impact on headline inflation numbers.
Ultimately, high prices encourage more supply and dampen demand. The definition of a real crisis, perhaps, is a situation where there is not enough gas to meet demand, which could mean rationing businesses for short periods of time. That prospect is still highly unlikely this winter, thinks independent energy analyst Peter Atherton, but is “a greater possibility than it has ever been since the 1990s.”
A lot can happen in the truly cold months, but politicians need to take note: an energy crisis is slowly building.
Primark doesn’t need to dress for a wobbly quarter
Did Primark finally become a crop due to its old-fashioned refusal to sell a single t-shirt or pair of flip flops online? Has the lockdown permanently changed the low-cost buying habits of the fashion game?
Well, that’s a possible reading of a dramatic drop in Primark sales numbers between mid-June and mid-September. In the first few weeks, UK stores were down 24% from the equivalent pre-pandemic period in 2019. Even in the past four weeks, sales were down 8%.
But the thesis that Primark was overthrown also seems wrong – or, at least, extremely premature. The explanation offered by AB Foods, its owner, was consistent: it is only the “pingdemia” factor at work. Main streets became less crowded, just as fewer overseas vacations decreased demand for seasonal kits. Management referred to industry data to support their reading – Primark’s overall market share was exactly the same as it was two years ago.
One of those years, Primark may have to rethink its lack of online transaction capability, but, for now, you can see why the chain isn’t wavering in its analysis that distribution and processing costs would undermine a model. which, for better or worse, relies on the fact that the clothes are extremely cheap.
It’s only been six months since customers of Primark’s flagship stores lined up to return after reopening. A wobbly quarterback probably doesn’t mean the world has changed.
An aerial marriage to the taste of O’Leary
“EasyJet and Wizz will either have to be withdrawn or… merge together,” Ryanair’s Michael O’Leary said, addressing the FT.
He is not the only one to predict consolidation in the European short-haul aviation market. Indeed, even easyJet, when it unveiled its £ 1.2bn rights issue last week, muttered that it was not opposed to the principle.
But it should also be noted that an easyJet / Wizz combo sounds like excellent news for Ryanair. O’Leary would surely love to see two competitors with different price propositions and very different cultures tie up while trying to cut capacity. He had cheered them up to the altar.