The UK energy crisis
energy and subsequently gas. The pressure on supplies last year has caused stored gas levels to be much lower this year, 6 and fewer gas reserves globally means that in the case of a sudden supply shock, the market price is much more vulnerable to fluctuations. 7
To sum up thus far, the energy crisis which we face is caused by a perfect storm of factors: thermally inefficient housing exacerbated by a heavy reliance for fossil fuels. When their price spikes due to uncontrollable international events such as conflicts, UK providers have very little choice but to keep buying fossil fuels and energy derived from fossil fuels abroad. This causes the high prices to be passed onto consumers. Now, I will describe the effects of this crisis on both consumers and the economy at large, discussing its contribution to dwindling economic growth spanning most if not all sectors of the UK economy, increased inflation and inequality with a decreased standard of living, ultimately risking tipping the UK into a recession. However, I will also discuss the positive consequences of such a crisis, forcing the UK to lessen its dependency on fossil fuels and switch to more renewable forms of energy.
This graphic shows a damning statistic: 8 a very sharp rise in inflation (1% to 10% in the space of 1 year), unprecedented since the 1970s. The energy crisis has had a very significant role to play in all of this. As water is essential to all organisms, so energy is essential to the function of all firms. Without oil, how can goods be transported across countries and continents? Without electricity, how can goods be manufactured, particularly on the mass scale demanded by our society? It follows that when the price of energy rises, firms must pay more money to manufacture and transport their goods (the cost of production). Subsequently, to maintain profit margins and wages, firms raise the price of their goods to increase revenue. This rise of
goods and services across all sectors causes the general price level of goods in the country to rise (inflation). More specifically, the type of inflation the UK is experiencing right now is termed cost-push inflation, as it is increased costs that are driving prices, not demand. 9
6 See https://www.capitaleconomics.com/clients/publications/energy/energy-update/sky-high-european-gas- prices-unlikely-to-be-sustained.
7 See https://www.bbc.co.uk/news/uk-northern-ireland-58558645. 8 See https://www.aol.co.uk/news/uk-soaring-inflation-compares-other-
135924716.html?guccounter=1&guce_referrer=aHR0cHM6Ly91ay5zZWFyY2gueWFob28uY29tLw&guce_refer rer_sig=AQAAALt3NP57ZHV7DMi5v0lppvdaiLmDAPyunVxiRvbECC9GLtFqxyDcdLn7nyi1deMYTxGbk214ld5c XyeLQmSvCwxCD_xBeNpLVyFSptR3HK4clHYASznby7DfzsASwFKeTE1PK7rJY- wjhCYO9XUZIAb9bApleXPHoMquxMGYip8M. 9 https://www.bbc.co.uk/news/business-12196322.
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