Rescue workers search for victims in the rubble in Rikuzentakata, northern Japan

Experts warn of higher energy prices after Japan quake

Experts have warned of higher UK energy prices after Japan's nuclear crisis sends natural gas costs racing to two-year high.

The price of liquefied natural gas (LNG) for summer delivery has leapt 7 per cent since Friday to 65p a therm - the highest since October 2008 - as fears mounted that imports to Britain would be hit as cargoes are diverted to stricken Japan following its earthquake.

Energy analysts said higher prices of LNG, which is everyday gas cooled to a liquid so it can be transported easily, would likely push up gas and electricity bills in the UK, where LNG covers around 20 per cent of the UK's daily gas needs.

Last Friday's devastating earthquake has halted 11 of 54 nuclear reactors in the country after two explosions in three days at its Fukushima Dai-ichi nuclear power plant and with others in automatic shutdown following the quake.

It is expected that Japan will be forced to import more LNG to meet its energy demand, hitting global supplies and the UK in particular, which relies on buying in LNG from countries such as Qatar to boost its waning North Sea output.

Matrix Group analyst Adam Forsyth said once: “Japan gets back on its feet, the country's immediate source of replacement generation is gas-fired, and that means Japan will need to import greater quantities of LNG.”

“While marginal on a world scale, there has already been a reaction in the gas market and we would expect higher prices in the LNG market to have an impact in the UK, putting upward pressure on higher gas and electricity prices,” Forsyth said.

Societe General analysts added that Japan's nuclear disaster could “lead to a setback for the world's nuclear renaissance”.

This could see gas become the “fuel of no choice” for countries in the Organisation for Economic Co-operation and Development (OECD), they cautioned.

The spectre of higher gas prices saw shares in London alternative energy stocks jump higher, with coal-fired UK energy producer Drax soaring as much as 7 per cent at one stage.

Gas exploration giant BG Group was also higher, up 2 per cent, as wholesale gas prices rose.

But energy and mining engineering company Amec, which provides services to the nuclear sector, suffered a 2 per cent drop.

However, there was some relief for oil prices as the cost of crude continued to fall on expectations that weaker Japanese economic output will depress its demand.

The price of Brent crude dropped to around US$111 a barrel while the price of oil futures on the New York Mercantile Exchange was below US$100 a barrel.

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