Energy Crisis Hammering UK's Stability
After slowly recovering from the storm of the COVID-19 pandemic, another wave of crisis is hitting the UK, which correlates with energy, spreading from the rising prices of gas, electricity, fuel to the scarcity of food stocks. The fuel stock condition in the UK is very concerning; a long line of cars and trucks is haunting the fuel station. The UK military has now put 150 tanker drivers on standby to help deliver fuel to service stations, following a spate of panic buying by British motorists. Electricity tariffs rose to the highest point, even up to millions of rupiah. The price of electricity purchase contracts for the industry is also near a record high. Supermarket shelves have also been reported to be barren. According to analysts from Financial Times, the panic purchasing of fuel in recent days is a sign of more immense supply chain difficulties that threaten to limit the economy's recovery from the COVID-19 pandemic. Questions are being raised as to why the UK is experiencing an energy crisis. One of the reasons is the shutdown of production at US-owned facilities, which reduces gas supply and the European Union's tightening of carbon market restrictions (EU). There's also the matter of Gazprom, the Russian gas corporation, manipulating pricing. Not to mention wind power, which is inefficient during the winter. With the current energy crisis, London has decided to revert to coal as a source of energy. Drax, the electricity production firm that owns the country's largest power station, recognizes this chance. "This facility (the power plant) has played a critical role in keeping people's lights on when the energy grid is under significant stress," Drax told AFP.
As a matter of fact, in recent months, many companies have reported shortages, including fast-food chains KFC, McDonald’s, and Nando’s. Supermarket shelves have also run dry. At first, the shortages drew a shrug. An inconvenience for some, but hardly the stuff to shake an economy or a government. But on Thursday (9/23) oil giants BP and ExxonMobil said that they had to close some gas stations. People, especially those with memories of the 2000 crisis, knew where this could end and headed to the pump thus the panic buying. Critics say Prime Minister Boris Johnson is to blame for failing to address the issue of a lack of truckers. He has been warned for months that there is a shortage of around 100,000 drivers across the trucking sector overall. The pro-Brexit Conservative government is keen to play down talk that the truck driver shortage is a result of Britain’s departure from the European Union. With Brexit, many tens of thousands of drivers left the UK to go back to their homes in the EU, further pressuring an industry already facing long-term staffing issues. The UK government is now trying to entice former British drivers back into the industry, as well as to accelerate the training of new drivers. It’s also offering visas to 5,000 foreign drivers to come to the UK for three months. Whether many will opt to come for such a short time and then face a race to get back home for Christmas remains to be seen.
The electricity crisis that forced Britain to return to using large amounts of coal to fuel their power plants can make coal company stocks better. "Coal prices still can strengthen due to increased demand, while supply is still limited. That is the main sentiment. However, this is likely only in the short term," Head of Research PT Henan Putihrai Sekuritas, Robertus Yanuar Hardy, " mentioned Tuesday (9/28). However, according to Robertus, many other sentiments, such as tightening liquidity through a reduction in bond purchases (tapering) by the US Central Bank, would continue to affect coal prices. Robertus predicts that the price of coal at the end of 2021 will be depressed to the level of US$190-180 per ton. The potential for an increase in the Fed's interest rate next year could also put pressure on coal prices again so that commodity prices could fall to the range of US$ 150-140. Furthermore, The price of coal in the international market is currently at the level of US$ 210 per ton, up nearly 200% compared to US$75 per ton at the beginning of the year. Nevertheless, the share price of coal issuers during the current year (year to date) only rose 33.5% on average, some of which were still negative. All in all, The crisis in the UK did not have a significant impact on the capital market in the long term.
Sources :
CNBC Indonesia
Financial Times
Investor Daily
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