UK energy bills suffer ‘apocalypse now’ blow with years of pain ahead | UK | News
Britain has faced years of rising energy bills and billions of dollars in government support costs after Iran’s attack on the world’s largest gas facility sent UK prices soaring and left ministers scrambling to protect households from the fallout.
Thursday’s attack on Ras Laffan destroyed a facility that supports a fifth of the world’s LNG supply and spans an area three times the size of Paris. QatarEnergy’s chief executive has made a sobering assessment of the damage, warning that it could take up to five years for the complex to return to full capacity. Markets reacted immediately; UK gas prices rose by more than a fifth and Brent crude rose eight per cent before pulling back.
Energy market traders described the situation as “apocalypse now.”
Tobias Federico, principal analyst at Montel Energy Analytics, said the attacks could trigger “an LNG race between Asia and Europe in the coming months.”
“Europe is approaching the period when it aims to refill its gas tanks before winter,” Federico said. “In parallel, further attacks in the Gulf region appear likely. Wholesale gas prices are likely to roughly double over the next three months to around 120 EUR/MWh, or 300 pence (UK) per therm.”
global shock wave
While the UK only gets two percent of its gas directly from the Gulf, the destruction of Ras Laffan, along with Iran’s ongoing blockade of the Strait of Hormuz, has sent shockwaves through global energy markets that will affect every household in the country, according to a report by i-paper.
A chorus of condemnation came from Western capitals. Starmer put his name to a joint statement with his French, German, Italian, Dutch and Japanese counterparts presenting a united front against Tehran’s campaign.
“We condemn in the strongest terms Iran’s recent attacks on unarmed commercial ships in the Gulf, attacks on civilian infrastructure, including oil and gas facilities, and the de facto closure of the Strait of Hormuz by Iranian forces,” the statement said.
“We express our deep concern about the escalating conflict. We call on Iran to immediately stop its threats, mine-laying, drone and missile attacks, and other attempts to close the strait to commercial shipping, and to comply with UN Security Council resolution 2817.”
Invoices are protected for now
For now, the price cap managed by Ofgem remains at bay; Ministers are struggling to make the point that households are protected from sudden shocks in the next quarter.
However, this protection has a fixed expiration date. The regulator is scheduled to review the cap again in mid-May and analysts agree that the review will create a significant upward correction, given what is happening in the Gulf.
According to Reeves, the arithmetic of intervention has changed dramatically. What started as a manageable support package is now becoming a much more expensive undertaking and the Chancellor is said to be reassessing the scale of what is needed.
His instinct is to concentrate aid on those least able to cope, rather than repeating the universal approach taken by Liz Truss after Russia’s invasion of Ukraine; This is a decision that has resulted in a £40bn loss to the public finances within two years.
