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As British summer approaches, many families are looking forward to relief from the heavy burden of high winter energy costs.
Despite the recent increase of 6% in the Ofgem energy price cap, which has reached £1,849 annually for an average household, there were hopes that this rise would be short-lived; typically, energy prices decline during the warmer months starting in July.
However, current forecasts suggest that this assumption may be overly optimistic, especially in light of upheavals in the global energy markets, which are causing instability within Britain’s energy sector.
Analysts are predicting that the UK could experience unexpected spikes in energy prices this summer as a result of a sharp decline in North Sea gas production coupled with intensified global competition for American gas imports.
A report from ICIS (Independent Commodity Intelligence Services) warns that gas shortages might linger throughout the summer, likely resulting in increased costs for consumers.
The situation underscores that the UK is far from achieving the ambitious pre-election promise by Energy Secretary Ed Miliband to reduce the average household energy bill by £300.
Moreover, the ICIS report highlights the UK’s increasing dependence on gas imports, which accounted for two-thirds of its energy needs last year. This stands in stark contrast to two decades ago when the North Sea was sufficient to meet domestic demand.
“Europe is expected to face a crucial summer in 2025 for gas storage, relying more on spot liquefied natural gas (LNG), especially from the US, as March imports approached record highs,” an ICIS spokesperson noted.
Spot LNG refers to gas cargoes traded for short-term delivery, typically within 90 days, contrasting with longer-term contract sales, leading to price volatility. ICIS anticipates that Europe’s requirement to replenish stocks, which were depleted during a cold winter, along with rising demand from Asia, will drive prices higher.
The UK’s increasing reliance on spot LNG is likely to shift more market power to the US, known for its dominant LNG production.
Almost half of the UK’s gas imports originated from Norway via pipelines; however, last year saw approximately 19 billion cubic meters of LNG imported, with around 12 billion cubic meters sourced from the US.
This dependency on American LNG exposes the UK not only to price fluctuations in global markets but also to the risks associated with trade and tariff policies from the Trump era, with potential tariffs on imports looming as “Liberation Day” approaches on April 2, when Trump has vowed to impose reciprocal tariffs on all global imports, leaving British officials with little hope for exemptions.
The trend of increasing LNG adoption is not unique to the UK. Many countries across Western Europe and Asia are also turning to American LNG, leading to its rapid growth and now accounting for 10% to 15% of global gas consumption.
This shift has proven lucrative for the US. According to the latest data from the US Energy Information Administration, the US exported 123 billion cubic meters of gas as LNG last year, surpassing all other countries.
Given that the UK has been hailed for its leadership in emission reductions, the question arises: how has it become so reliant on a volatile and expensive energy source?
A Historical Evolution
The UK’s journey towards LNG dependence can be traced back to February 1959, when British Gas, then a state-owned entity, modified a US cargo ship to create the world’s first LNG tanker.
Renamed Methane Pioneer, this vessel carried the inaugural seaborne LNG cargo from Louisiana to the Canvey Island Terminal of the British Gas Council, proving that significant quantities of LNG could be safely transported across oceans.
LNG has since become a key fuel source, largely due to its effectiveness in global transit logistics.
The technology used for LNG involves cooling methane to extremely low temperatures of -162°C, allowing the gas to convert into a liquid, which occupies only one-six-hundredth of its gaseous volume.
Upon delivery, LNG is regasified before being transported through the natural gas transmission network to consumers.
Since the initial journey of the Methane Pioneer, LNG trade has expanded at an annual rate of roughly 11%. In 1971, about 2.6 million metric tonnes were traded, and by 2023, this figure is projected to rise to 410 million metric tonnes.
This expansion is expected to continue, with Shikha Chaturvedi from JP Morgan forecasting a 54% increase in global LNG supply capacity by 2030.
An Expensive Habit
Major corporations, including Shell, are investing heavily in LNG based on these projections. Recently, CEO Wael Sawan emphasized the strategic significance of LNG for the company’s future, noting that they are building the largest LNG capacity among competitors, including a sizable fleet that represents about 10% of global LNG shipping capacity.
Sawan argues that the transition to LNG will facilitate reducing carbon emissions by replacing dirtier fossil fuels, particularly coal. However, these assertions are disputed by the UK’s domestic oil and gas sector.
Offshore Energies UK (OEUK), the trade body for North Sea oil and gas companies, which counts Shell among its members, has expressed concerns that the LNG shift will lead to increased pollution and elevate costs for consumers.
OEUK further argues that American LNG has a significantly larger carbon footprint compared to other gas sources, being up to ten times more polluting than Norwegian gas.
Some experts even claim that LNG may be more harmful to the environment than coal.
Research conducted by Professor Robert Howarth of Cornell University indicates that the greenhouse gas emissions associated with LNG are 33% worse than those of coal once processing and transportation emissions are factored in.
The underlying issue is that methane has a global warming potential that is 80 times greater than carbon dioxide, and some amount of methane always escapes during extraction, transportation, and regasification stages.
The Future of Gas-Dependent Britain
As the UK navigates its energy trajectory, one must question how successive governments—committed to the 2008 Climate Change Act and its goal of achieving net zero by 2050—have allowed the country to become so reliant on a pollutive and costly energy source.
The level of gas consumption in the UK is staggering, ranging between 65 billion and 70 billion cubic meters annually, or roughly 1,100 cubic meters per person—roughly equivalent to 14 double-decker buses’ worth of gas.
Around one-third of this energy is used in the 25 million domestic boilers that heat British homes, with a comparable amount dedicated to electricity generation, while the remainder is utilized by industrial and commercial sectors.
However, domestic production is on the decline due to natural depletion and regulatory pressures that have discouraged investment in the North Sea. It is projected that by 2030, approximately 180 out of 280 gas and oil fields will be closed.
The Climate Change Committee anticipates that adhering to a balanced approach towards achieving net zero will require the UK’s consumption to decrease to 56 billion cubic meters by 2030.
Currently, the UK is off-track in meeting these targets, but projections still indicate that roughly 20 billion cubic meters will need to be consumed by 2050. The North Sea Transition Authority estimates that around 19 billion cubic meters will have to be imported.
For a gas-dependent UK, the reliance on LNG is expected to persist, placing the nation in a global market where demand is constantly rising.
Seb Kennedy, editor of the respected Energy Flux newsletter specializing in LNG trade, warns that the UK’s increasing dependence on imports will create long-term opportunities for traders while leading to rising costs for households.
“LNG now constitutes between 20% and 40% of UK natural gas demand, subject to market conditions. The sharp decline in North Sea production only heightens the UK’s ongoing reliance on LNG to bridge the gap.
“Regardless of market conditions, traders benefit while consumers often end up shouldering the financial burden,” he noted.
For families desperately hoping for lower energy bills, adapting to the realities of global energy fluctuations may become essential.
Source
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