Gas price crisis: UK government to take action as energy companies warn of collapse

Secretary of state for Business, Energy and Industrial Strategy Kwasi Kwarteng said he had spoken to CF Industries in a bid to ensure production of carbon dioxide would resume as soon as possible. Photo: Victoria Jones/PA Images via Getty

The UK government said on Tuesday it is readying action on the gas price crisis and carbon dioxide shortage. 

The moves come as consumers face rocketing prices and wholesale gas costs threaten to put smaller suppliers out of business. 

Wholesale prices for gas have surged 250% since January, which is having a dramatic knock-on effect.

Reasons behind the dramatic increase in power prices include low gas reserves, strong commodity and carbon prices, heightened global demand and low wind output.

Business secretary Kwasi Kwarteng said he had spoken to CF Industries, the country’s biggest carbon dioxide supplier, in a bid to ensure production of carbon dioxide would resume as soon as possible. Action by the government could include subsidies. 

Carbon dioxide is an essential element of the frozen foods sector and the shortage has intensified fears about gaps in food supplies. 

CF Industries has halted production at two UK plants due to rising gas costs.

Kwarteng told the BBC earlier today that the government was considering lending money to bigger gas firms to help them take on stranded customers, following comments that the government wouldn’t “prop up failing companies.”

“I do not think it’s the right thing for taxpayers’ money to be injected into companies that have been badly run,” he said.

He said 55 companies currently exist in the sector and it is unlikely that all of them will be bailed out by the government.

He also ruled out nationalising CF Industries, a move that had been touted as an option by other MPs. 

Read more: Why UK is facing energy crisis and what it means for consumers

Smaller firms are facing backlash from customers, having made price promises which will be impossible to keep in the current climate. This could damage competition — at the start of the year there were 70 energy suppliers in the UK. This number could dwindle to 10 by the end of the year, industry sources told the BBC.

Benchmark natural gas prices in the UK and in Europe have tripled this year, and the rise in prices will mean higher energy costs for companies and more expensive bills for consumers.

The surge is set to eat into the profits of several energy firms over the coming months, and pressure net profit margins which are already at their highest since 2008.

Kwarteng told parliament on Monday energy supplies would not run out, a cap on energy prices would remain in place, and the government would seek to protect vulnerable consumers.

Watch: ‘We’re focused on helping the vulnerable’ Kwarteng on energy crisis