The Government will hold crisis talks with industry bosses today after soaring gas prices and a lack of carbon dioxide sparked fears of widespread food shortages.
High global demand, maintenance issues and lower solar and wind energy output have all been blamed on the increased cost of wholesale gas, which in turn has forced much of the UK’s commercial production of CO2 to stop.
Two of England’s biggest fertiliser plants in Teeside and Cheshire – which use the gas to produce ammonium nitrate, which is then used by farmers for their crops – have shut down, leaving bosses concerned over the potential consequences for family essentials.
The food industry describes carbon dioxide as being fundamental to producing and transporting supermarket staples like bread and meat, as well as beer and fizzy drinks.
Some fear businesses have less than two weeks before their stocks of the gas begin to run out, with one boss describing the crisis as a ‘black swan type of event’, adding that ministers and supermarket giants were only now appreciating the knock-on effects on agriculture and production.
Meat producers are now urging the Government to step in to protect the food supply chain.
Two of England’s biggest fertiliser plants – which use carbon dioxide to produce ammonium nitrate, which is then used by farmers for their crops – have shut down, leaving bosses concerned over the potential consequences for family essentials
The food industry describes carbon dioxide as being fundamental to producing and transporting supermarket staples like bread and meat, as well as beer and fizzy drinks
Some fear businesses have less than two weeks before their stocks of the gas begin to run out, with one boss describing the crisis as a ‘black swan type of event’, adding that ministers and supermarket giants were only now appreciating the knock-on effects on agriculture and production
Nick Allen, chief executive of the British Meat Processing Association, told the Times: ‘This could be the straw that broke the camel’s back.
‘It is potentially a massive challenge for the food industry when we are already facing huge issues.’
Speaking to the BBC Radio 4 Today programme, he added: ‘If we haven’t got the CO2 supplies, on the packaging side that reduces the shelf-life of products going on the shelves at a time when we are really struggling because of all the transport problems.
‘This has come as a huge shock, it has happened so quickly. I think everyone is outraged in the industry that these fertiliser plants can shut down without any warning whatsoever and suddenly take something which is so essential to the food supply chain off-stream just like that.
‘We really need Government to step in now and actually do something.’
Meanwhile, Business Secretary Kwasi Kwarteng will talk with chief executives from gas producers, suppliers and regulator Ofgem today to discuss the extent of the impact of the surging prices.
Government sources have reportedly told the BBC there is no threat to the UK’s gas supplies, but potential impacts on small energy companies most at risk of exposure are being monitored.
A Government spokesperson told the broadcaster: ‘The UK benefits from having access to highly diverse sources of gas supply to ensure households, businesses and heavy industry get the energy they need at a fair price.
‘We are monitoring this situation closely and are in regular contact with the food and farming organisations and industry, to help them manage the current situation.’
It comes after Russia was last night accused of rigging the prices of gas to damage Britain’s economic recovery from Covid.
The country’s state-owned energy firm, Gazprom, is now facing an investigation into the rise in price.
The country’s state-owned energy firm, Gazprom, is now facing an investigation into the rise in price. Lawmakers said they were suspicious of the company’s ‘effort to pressure’ Europe to agree a fast launch to its Nord Stream 2 gas pipeline (pictured)
And more than 40 MEPs last night signed a letter to the company in which they accused it of ‘deliberate market manipulation’.
Government ministers last night were in emergency talks with food producers to try and tackle the issue.
Two fertiliser plants were forced to close down in the north of the country due to a lack of carbon dioxide available in the food industry which has a devastating effect on the product of lots of products including meat.
And food supply chains are already under a significant amount of strain due to a shortage in delivery drivers caused by test and trace systems forcing isolation and some drivers leaving the UK after Brexit.
Meat industry workers warned last night that the disruption in supply mean carbon dioxide stocks would run out within two weeks, meaning it can’t be used to stun pigs and chickens prior to being killed.
A group of European Parliament lawmakers has asked the European Commission to investigate Gazprom’s role in soaring European gas prices, saying the company’s behaviour had made them suspect market manipulation.
Gas prices in Europe have surged in recent months, helping to drive European electricity costs to multi-year highs.
Dermot Nolan, a former Ofgem chief executive, said the increases were the result of depleted stocks following a cold winter last winter, reduced supply from Russia, and increased demand for liquefied natural gas from the Far East.
He told the BBC Radio 4 Today programme: ‘It is not obvious to me what can be done in the very short run. Britain does have secure relatively diverse sources of gas, so I think the lights will stay on.
‘But I am afraid it is likely in my view that high gas and high electricity prices will be sustained for the next three to four months.
‘It is very difficult to see what the Government can do directly in this regard.’
And more than 40 MEPs last night signed a letter to the company in which they accused it of ‘deliberate market manipulation’. Pictured: Russian President Vladimir Putin
Electricity prices in the UK skyrocketed to 11 times above normal levels on Monday.
In a letter to the EU’s executive Commission around 40 of the Parliament’s 700 lawmakers said they suspected Russia’s Gazprom had acted to push up gas prices.
‘We call on the European Commission to urgently open an investigation into possible deliberate market manipulation by Gazprom and potential violation of EU competition rules,’ said the letter.
In response to the accusations, Gazprom said it supplied its customers with gas in full compliance with existing contracts.
The European Commission said it had received the letter and would reply in due course.
The lawmakers said they were suspicious of the company’s ‘effort to pressure’ Europe to agree a fast launch to its Nord Stream 2 gas pipeline, which still has to clear regulatory hurdles that could take months to complete.
Gazprom announced last week that it had completed construction of the Nord Stream 2 pipeline to Germany, doubling its gas exporting capacity via the Baltic Sea.
Nord Stream 2 has faced sanctions from the United States and criticism from other countries wary of the EU increasing its reliance on energy imports from Russia
The EU lawmakers cited incidents including recent shut-ins of some of Gazprom’s production and said the company had refused to book gas transport capacities through existing pipelines.
‘All these factors allow to suspect that the record natural gas price surge in Europe in the recent weeks may be a direct result of Gazprom’s deliberate market manipulation,’ the letter said.
Nord Stream 2 has faced sanctions from the United States and criticism from other countries wary of the EU increasing its reliance on energy imports from Russia.
Tobias Ellwood, a former minister and chairman of the defence committee, told the Telegraph: ‘This attempt to manipulate gas prices is an example of grey zone conflict where economies are directly targeted to cause political strife and raise civil unease. An example of the constant competition we now face from authoritarian regimes.’
Chris Bryant, a member of the foreign affairs committee, told the publication: ‘Russia has been abusing the energy market in Europe for years, holding countries to ransom and forcing up prices. We need a strong united front with other European countries to stop this cynical abuse. Boris Johnson needs to guarantee our energy security without relying on Russia.’
Gazprom released a statement saying: ‘Gazprom delivers gas under consumer requests fully in line with contract obligations.’