Gas (Supply and Demand)

Part of the debate – in the House of Commons at 3:51 pm on 14th March 2006.

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Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry 3:51 pm, 14th March 2006

I do not think that the country is on a knife edge. A gas balancing alert has been issued. That mechanism has operated in the electricity sector for a number of years, and as the hon. Gentleman knows, it has recently been introduced in the gas sector. It is an extremely important mechanism for telling the market that demand is exceeding supply, which means that the market responds to that. Saying that the country is on a knife edge is, I suggest, a wee bit of hyperbole.

The hon. Gentleman asks what Government are doing. The one thing that the Government should not do is interfere in the market. I would be interested to know what the Conservatives would do in such circumstances. The days when our energy was provided by state monopolies were bad for the consumer, bad for the energy supply situation and bad for the country.

The hon. Gentleman talks about the effect on consumers, but according to the most recent figures, we in this country are still enjoying the cheapest domestic gas in Europe. Industrial customers have had problems this winter, not only because of the problems caused in all European countries by high oil prices—Germany's wholesale gas prices have increased by 80 per cent., Denmark's by approximately 40 per cent. and France's by 20 per cent.—but because we have a tight situation in the UK this year, and probably will next year, too. We discussed that during the important debate in the House in January.

The analysts and experts misjudged the amount of gas that would come from the North sea. The period of adjustment to that is difficult, but it would have been ludicrous for this country to have storage facilities when it had a reserve in the North sea. The Netherlands and Norway, which also have indigenous supplies, do not have huge amounts of storage. We must get the right balance in terms of transfer across.

I think that the system is working for the benefit of consumers. We have had a difficult winter, but what the Government should do about that is to ensure that the market is operating properly—that is a particular issue for Europe—and that Ofgem and the right mechanisms are in place to see any possible crisis coming and deal with it. There is no national emergency at the moment; there is a gas balancing alert.