UK Energy Crisis: Is It Really About Global Gas Prices?

The UK's energy crisis has been attributed to international wholesale gas prices. However, research suggests that this narrative is flawed.

According to a report by Porter, British gas is not sold on a mythical global market at a single global price. Instead, the GB market uses marginal pricing, where the last cargo needed to balance the system sets the price.

This means that extra UK Continental Shelf gas lands on the National Transmission System and displaces expensive LNG, which does not vanish into a world pool and come back at a world price. In fact, Britain has been a net exporter to the Continent in recent years, including during winter months, due to its lower prices.

The report argues that if ministers believe extra North Sea gas cannot cut UK prices, they will treat licensing, tax, and field approvals as climate theatre rather than price and security policy. However, maximizing domestic production is the rational choice: cheaper than LNG, lower-carbon than LNG, and physically tied to the British grid.