Energy Prices are So High in Europe That UK Factories are Shutting Down
Remember the villains in Home Alone? Getting hit with a paint can to the head, tarred and feathered, a blowtorched scalp, slipping on toy cars. The pain never stopped.
That’s what European energy markets look like right now. And, on Thursday, a burgeoning power crisis squeezing every conceivable source of power got so bad that factories shut down.
Which Way The Wind Doesn’t Blow
It’s hard to overstate just how many calamities have smacked European energy markets dead-on at this point.
Continental Europe is struggling to refill fuel reserves before winter, but its chief suppliers Russia and Norway don’t have enough supply. Liquefied natural gas is being bought up by Asia to meet its own demand, making the shortage worse. Wind in the UK isn’t blowing enough so wind power’s out (weekend forecasts don’t look good). There are unplanned nuclear outages in France. And to top it off, on Wednesday a power cable connecting Britain with France, its main electricity provider, caught on fire and shut down. Wile E. Coyote has taken fewer lumps than this.
On Thursday, it reached the point where factories shut down because it’s too expensive to operate:
- American fertilizer CF Industries shut operations at its Billingham and Ince facilities, citing natural gas prices that have tripled in Europe and the UK this year.
- Next day delivery power costs hit an astronomical £425 ($589) per megawatt-hour in the UK this week, 10 times higher than a year ago.
The S— Hits the Financial Plan: The shutdown means fertilizer prices, already at their highest since 2008 and recently driven up by storms in the Southern US, are expected to jump more. That will cost farmers, and could mean more food inflation at a time when food is already the priciest it’s been since the 1970s.
Winter of Discontent: Goldman Sachs warned there’s a “non-negligible risk” that a colder-than-average winter could mean power blackouts for European industry. In other words, a good time to invest in blankets.