25 September, 2021
One day after oil giant BP warned about rationing gasoline and diesel at UK service stations, Brits began to panic buy fuel as the government tried to calm fears.
Lines of cars and trucks are spilling over into the streets at service stations across the country. A BP spokesperson said Thursday that a truck driver shortage has resulted in its inability to transport fuel from refineries to its network of service stations. These words spooked the public, which could cause a more severe shortage due to the hoarding.
The scenes of long lines at gas stations bring back memories of the 1973 Opec Oil Crisis, the 2000 fuel shortage, and the virus pandemic disruptions amid fears the country is diving headfirst into a 1970s-style “winter of discontent” of shortages and socio-economic distress.
On Friday afternoon, Transport Secretary Grant Shapps told Brits on Sky News that there was no fuel shortage and for “everyone to carry on as normal.” His soothing words weren’t enough to stop the buying panic, which is expected to continue into the weekend.
Gasoline and diesel shortages will only stoke higher prices amid an expanding energy crisis that has resulted in another shortage: natural gas. This has caused power prices to erupt and disrupted chemical plants that halted fertilizer production, and has caused headaches for major food supply chains. Brits are also panic hoarding food.
The Daily Mail provides a list of issues that threatens a winter of discontent:
1. A shortage of natural gas causing a spike in gas bills for millions of Britons, along with the possibility of dozens of small energy firms going bust;
2. However ministers say ‘there is question of the lights going out, of people being unable to heat their homes. There will be no three-day working week, or a throwback to the 1970s’;
3. A shortage of natural gas leading to the closure of fertilizer plants, which produce the CO2 used in fizzy drinks and the meat industry;
4. The Government has since agreed a deal with fertilizer firms to restart a factory in a bid to maintain CO2 production;
5. A lorry driver shortage which is crippling the UK’s transport industry, leaving to empty shelves and slow delivery times;
6. Bosses say this could impact both of Christmas dinners and have an impact on the number of toys on the shelves;
7. Now bosses of major fuel firms have warned they will have to start shutting petrol stations because there are not enough lorry drivers to effectively distribute to all of its petrol stations;
8. It comes after the Bank of England warned on Thursday that surging household energy bills would send the cost of living spiralling by more than 4 percent this winter – the highest rate of growth for a decade
Worst still, there are now fears that shortages could bite households in the run-up to Christmas. The classic Christmas dinner could be decimated, with turkey, pigs in blankets, potatoes and brussel sprouts all at risk.
Europe’s energy crisis has claimed another victim, with Austrian fertilizer producer Borealis AG slashing the output of ammonia after the cost of the primary feedstock, natural gas, compresses margins in an industry already facing tight supplies, according to Bloomberg.
Borealis’ ammonia-producing plant uses natural gas to make fertilizer. The high cost of natgas makes fertilizer uneconomical to make. This is yet another sign of deepening woes for the industry after the UK government said it would provide “limited financial support” to help CF Industries restart one of its fertilizer plants this week.
The culprit behind surging natgas prices has been declining flows into Europe via Russia, though there are signs natgas shipments could increase in November. But that won’t alleviate high prices because stocks on the continent are well below average ahead of the winter season, indicating Europe’s energy crisis may drag on for months.
Disruptions of ammonia supply and other fertilizers have had a significant impact on the production of carbon dioxide supply in the UK, sending the industry into a tizzy and rippling through food supply chains, such as slaughterhouses to packaging to carbonated drinks to dry ice production.
Commodity analysts at CRU Group said half the continent’s ammonia capacity could be at risk due to dwindling production because of elevated natgas prices. Spot prices of ammonia per ton in Western Europe have surged from around $225 per ton at the beginning of the virus pandemic to $700 per ton this month.
Borealis’ reduction in ammonia production is a sign the fertilizer crisis continues to ripple across the continent. The company said Thursday it would analyze the situation” regarding its plants in Austria, France, and the Netherlands – not much detail was given.
“This is an ongoing story. All the nitrogen producers in Europe will be reviewing what they do,” said Allan Pickett, head of analysis at IHS Markit’s fertilizer group, Fertecon. “With gas prices where they are, we would confidently expect that there will be significant pressure on many of the ammonia producers related to the fertilizer industry.”
Pickett said the fertilizer industry would remain under pressure as long as natgas prices remain high. There’s an increasing possibility that farmers may refuse to purchase fertilizer for the upcoming 2022 growing season because of high prices.
Bloomberg Intelligence analyst Jason Miner said the move by Borealis suggests “they’re running close to margins; otherwise, they wouldn’t have shut down.” He warned that “other plants will shut down unless natural gas prices change.”
A perfect storm of events, such as declining Russian natgas into Europe, triggering an energy crisis that now bears down on food supply chains in the UK and possibly Europe, has the potential to create widespread disruptions. As for the 2022 growing season, farmers might become hesitant to plant with fertilizer prices at high levels.