Brace yourself for another energy crisis

In the Netherlands, the petrol price has risen to almost €2 per litre. But in Britain they have very different problems. In that country, many gas stations even have no fuel at all, while one natural gas supplier after another goes bankrupt.

The petrol price is more than a third higher than in the spring of 2020. For a full tank of 50 liters, the extra costs rise to approximately €25. The main reason for this difference is the sharp rise in the oil price. Just days ago, a barrel of Brent oil traded above $80 for the first time in over three years.

An important reason for the rising oil price is a growing energy demand, as a result of the start of the global economy. In fact, the supply increases at a much slower rate. It is unlikely that that will change at next week's OPEC meeting. Many oil-producing countries are reluctant to increase production now and thus run the risk that the price will plummet again in the future.

Can't get gas
Nowhere are oil problems more acute than in Britain. In that country, no less than 50% to 90% of all gas stations were without fuel, according to industry association PRA. However, these shortages have nothing to do with the high oil price. There are simply not enough truck drivers in the country to supply the gas stations. Due to stricter rules after Brexit, an estimated 20.000 foreign drivers have chosen to return to their home country. The shortage was exacerbated because many older truckers chose to retire due to the corona outbreak, while lockdown measures made it difficult to get a large driver's license.

Bankruptcy wave
The 5.000 temporary visas that have been promised to foreign drivers are only a drop in the ocean. This also applies to Prime Minister Boris Johnson's commitment to deploy the military if necessary. These measures are mainly aimed at curbing the hoarding anger of the British population. At least as worrisome as the petrol shortages at the pump are the problems at British natural gas suppliers. On Wednesday, Igloo Energy, Enstroga and Symbio announced their bankruptcy. Ten utilities have collapsed since early August. Rising gas prices and the start of the energy-intensive winter season are making it more difficult for the remaining parties to supply both their own customers and those of the disappeared suppliers with electricity and natural gas.

Oil coins: calm before the storm?
It looks like Britons will spend a lot more on energy costs in the coming period. They cannot spend that money on other things, so that consumption and economic growth may be somewhat disappointing. In currency markets, the pound has lost significant ground against the euro and especially the dollar in recent days. On the other hand, there is still remarkably little movement in oil currencies, such as the Canadian dollar, Norwegian krone and Russian ruble. But that may change in the run-up to the OPEC meeting.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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