Before Britain started worrying about a shortage of lorry drivers and petrol, we were fretting about a spike in wholesale gas prices. A couple of weeks and news cycles later, it would be easy to imagine that crisis had gone away. It hasn’t. On the contrary, global gas markets are preparing for a volatile winter. Britain, along with the rest of Europe, will face the full force of the crisis, raising the prospect of factory closures, if not general power cuts.
Like Covid, the energy crisis came from China but has spread worldwide. Last week, Xi Jinping’s government raised the stakes by ordering its state-owned energy companies to secure winter supplies ‘at all costs’, in effect declaring a global bidding war for increasingly scarce seaborne cargoes of liquefied natural gas (LNG) and thermal coal. For Britain, that has consequences. We are heading towards a bidding war for gas that China is determined to win.
The queues for petrol have been a headache for Britain but China has been in crisis for several weeks now, leading to power-rationing for industrial consumers and blackouts in some residential areas. There are reports of disruption to water supplies and mobile phone services, even traffic lights and streetlamps losing power, while fearful householders rush to empty the shelves of candles.
Initially, the Chinese government responded by ordering factory closures (or four-day weeks) and calling for homes and offices to limit use of heating and cooling systems. Emergency coal mines have been opened to feed the many thousands of furnaces across northern China that keep residential tower blocks warm, factories running and power grids energised throughout the darkest, coldest months of the year.
A Chinese state mandate to outbid other gas and coal importers will have especially wide-reaching repercussions in the UK and Europe, which rely on secure and affordable imports of gas and coal to keep their economies running too.