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The 'black swan' that allied with Brexit: gas prices exacerbate UK shortages

2021-09-18T13:40:57.890Z

Johnson Government holds emergency meetings with representatives of the food and energy industries Disused drilling rigs in the Cromarty Firth, (Scotland), on April 27, 2020.Robert Perry / EFE The response of Harold Macmillan, the Conservative Prime Minister of the United Kingdom from 1957 to 1963, is already part of the instruction manual of any government. When asked what was the greatest challenge for a political leader, he said that of “events, dear boy, events” ( Events, dear boy, events



Disused drilling rigs in the Cromarty Firth, (Scotland), on April 27, 2020.Robert Perry / EFE

The response of Harold Macmillan, the Conservative Prime Minister of the United Kingdom from 1957 to 1963, is already part of the instruction manual of any government. When asked what was the greatest challenge for a political leader, he said that of “events, dear boy, events” (

Events, dear boy, events

). Boris Johnson came to Downing Street with an extremely ideological vision of what he wanted for his country, and events have twisted his arm. First, the pandemic. Second, the consequences of a Brexit that was never measured with pragmatic criteria; and now a global energy supply crisis that not only inflates consumer bills for electricity or gas, but threatens to exacerbate food shortages.

MORE INFORMATION

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Two of the main UK fertilizer plants, Billingham and Ince, suspended production on Thursday.

The US owner,

CF Industries

, attributes its decision to the spectacular rise in the price of gas in the wholesale market, and has been unable to give a clue as to the date of resumption of activity. The two plants, which produce about a million tonnes a year of fertilizers, are also the producers of 60% of the carbon dioxide, a derivative of fertilizers, consumed by the United Kingdom. This has been the reason why the British Minister of Commerce, Kwasi Kwarteng, has brought together the department's "energy resistance unit", and has called emergency contacts with representatives of the country's energy and food industries.

Carbon dioxide is used to put animals to sleep in slaughterhouses in the meat and poultry industries;

It is fundamental for the elaboration of some bakery products;

Essential element for carbonated drinks or beer;

It is used to make the ice with which many perishable foods are transported and it is a very necessary gas to prolong the preservation of many packaged foods that end up on the shelves of supermarkets.

The huge rise in gas has become the

black swan

defined by statesman Nassim Nicholas Taleb: the highly improbable event, the surprise, that alters the forecasts. Johnson's forecast when Brexit ended was that the UK would prosper as a lone new player in international trade; Johnson's forecast was to emerge from the pandemic with a strong and thriving economy. What could not be imagined was that the supermarket shelves would end up desolate and empty due to a lack of truckers - it is estimated at 100,000 the necessary to overcome the situation - and that the agricultural, livestock or food processing industries would not have enough hand of work to go back. The Immigration Law that the conservative government rushed to pass as soon as it left the EU restricts the arrival of community immigrants.A large part of the one million and three hundred thousand people who returned to their countries during the pandemic have stayed in their countries, either because of the low attractiveness of the British market, or because they were not able to previously regularize their situation and now the return is complicated.

“All this [the price of gas] could be the last straw.

This is a huge potential challenge for the food industry, which was already experiencing a lot of problems, ”said Nick Allen, executive director of the British Meat Producers Association.

The closure of the fertilizer plants will also affect the agricultural industry, due to the foreseeable rise in prices and the added difficulty of securing supplies.

Problems that, in the medium term, can aggravate the supply chain to supermarkets and retailers.

"We are closely monitoring the situation, and maintain regular contacts with organizations in the food and agricultural industries, to help them manage current problems," said a British Government spokesman.

Beyond possible financial aid, the Johnson Executive does not want to give his arm to twist in his policy of work visas, something that would serve in part to alleviate the current tension.

The electricity bill skyrockets

British consumers are still relatively protected from a global spike in energy prices. During the conservative government of Theresa May, the so-called

energy price ca

p (

energy price

limit) was introduced. Since January 2019, the regulatory body, the Office of the Gas and Electricity Markets (OFGEM, in its acronym in English), establishes twice a year the limit of the annual bill that any dual consumer of gas and electricity ―who you have not contracted a fixed rate - you can pay. The change takes place from April or October, and is announced well in advance. Last August, a strong rise was already warned by the end of the year.

As of October 1, British consumers will have a cap of 1,495 euros per year, that is, about 124 euros per month. It is a rise of 12% compared to the previous figure, but the problem is that the next review, according to the experts, will be much higher in percentage. At least a dozen small intermediaries operating in the British energy market have had to close the deal, unable to meet the price limit imposed by the Government. Large companies have had to take on the service of all these hundreds of thousands of consumers who have suddenly been left without a provider. There are already many voices in the industry that demand a review every two months, and not every two years, of the price that they can transmit to their customers, to try to face an uncontrolled situation.

Source: elparis

All business articles on 2021-09-18

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