How the natgas crisis emulates the Northern Rock crisis

How the natgas crisis emulates the Northern Rock crisis

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Britain’s natural gas shortage, and fears of a possible winter of discontent featuring 70s-style rolling blackouts, have been driving headlines all week. But a fact largely missing from the coverage is just how closely the structural situation resembles the one that drove the collapse of Northern Rock in 2007, and which later catalysed the wider financial crisis of 2008.

Before we set out how, though, it’s worth stressing that the natgas shortage is not solely a UK phenomenon. Europe is suffering too. Significantly.

The shortages themselves are the product of a perfect storm of global issues. These include under-stockpiling during the summer period in Europe due to more competition for LNG (liquid national gas) supplies from Asia; uncertainty related to delays in the launch of theNord Stream 2 pipeline from Russia; and colder-than-expected weather in many parts of continental Europe, including Russia itself.

While it may feel like the natgas price hike is particularly acute in the UK relative to Europe, where prices have at times been significantly lower, this is not outside the norm. Because the UK is a net importer, it often has to attract supplies