Gas prices adding £1.7 billion to cost of beer and bangers

President Putin's warmongering may threaten British sausages and pints of beer.

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By George Smeeton

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The Russian leader has exerted control over Europe's gas supplies and indefinitely shut down a key pipeline. This has sent the price of gas in the UK to record highs in recent months. Factories in the UK and Europe that make fertilisers used to grow food and liquid CO2 used to package food and make fizzy drinks, have been severely affected by this gas price, forcing them to cut production or close entirely.

New analysis by the Energy and Climate Intelligence Unit suggests that the UK's food and drink sector could end up footing an extra bill for liquid CO2 in the region of £1.7 billion if gas prices stay high. This is because the price of a tonne of liquid CO2 is now up to 3000% higher than a year ago, currently as much as £3000 per tonne, compared to just £100 per tonne one year ago.

Last October the price of gas forced some of these factories to shut and led to a shortage of liquid CO2, and fears of knock-on food and drink shortages.

CF Fertiliser's factory, which makes around 60% of the UK's liquid CO2 supply, again reduced production due to high gas prices in late August this year.

Ultimately, these costs could end up on the price of food and drink products that consumers are buying.

There are new fears that gas prices could rise further, or even that supplies will be cut off, leading to increases in the price of liquid CO2 or a repeat of last year's shortages. Liquid CO2 is used for everything from packaging food to keep it fresh, to making beer and other drinks fizzy, to stunning animals in abattoirs to make products like sausages.

Businesses in the food and drink sector are already paying significantly more for energy than even a few months ago. In the first quarter of 2022 businesses like pubs, farms, and supermarkets paid 71% more for gas than in the first three months of 2021, and 28% more for electricity.

Fay Jones, Member of Parliament for Brecon and Radnorshire and Chair of the Farming APPG, said: "The price of gas is adding thousands of pounds to families' energy bills. Now, like last autumn, it could affect supplies of CO2 and of fertilisers, and drive up the price of everything from beer to bacon.

"Shortages of CO2 would come on top of the dry weather, and sky-high prices for farming ingredients like fertilisers and energy. This is another sign of how exposed farmers, and the UK food and drink industry, are to the price of fossil fuels and to climate change. The solution lies in achieving net zero which in turn lends itself to improved food and energy security. Home grown renewables are already helping keep energy bills down as well as providing an option for farmers to diversify their business. But also, British technology though cutting edge green fertilisers that aren't made from gas could provide an alternative to farmers."

Matt Williams, Climate and Land Programme Lead at the Energy and Climate Intelligence Unit, said: "The UK's reliance on fossil fuels affects more than just families' energy bills. It could bring the food and drink system to its knees. Rising energy costs are creating an extra cost of hundreds of millions of pounds in the food and drink industry that customers may struggle to avoid. If high gas prices, or even blackouts, force factories to close it could create real problems for farmers and the food and drink industry. We're already seeing last autumn's liquid CO2 shortages begin to play out again, starting with the factories that make it cutting production.

"High gas prices have pushed up the cost of fertilisers for farmers. The Government's new farming system, which will reward net-zero farming practices by restoring soils, will help farmers to reduce the use of fertilisers and shield themselves from these high prices. British companies are also leading the way in making low-carbon fertilisers and are also developing technologies to help capture CO2 from industrial processes, like making steel. These new net zero technologies can create jobs at home, generate low-carbon British exports to the world, and help protect food and drink supplies, bringing down food bills for families."

British Poultry Council Chief Executive, Richard Griffiths, said: “CO2 is critical to our national food security and yet the Government, in the midst of a cost of living crisis, is allowing supplies to be jeopardised. The arbitrary price hikes we are now seeing will hit our food producers, and ultimately consumers, very hard indeed.”

Emma McClarkin, Chief Executive of the British Beer and Pub Association said: “A guaranteed supply of CO2 is essential for operations across pub and brewing businesses, but currently extreme volatility in wholesale energy prices is resulting in unprecedented price fluctuations and uncertainty of supply for our industry. Alongside extreme energy costs and other inflationary pressures our pubs and brewers are being forced to make extremely tough business decisions, with many not being able to plan even a week or two in advance and at a point where such preparation is vital to prepare for the festive trading period.

“To avoid beer shortages and pub closures we need the Government to ensure there is a sustained, reliable supply of CO2 to our industry, holding suppliers to account in the process. Breweries need reassurance that they will be able to keep producing and supplying beer to pubs so they are able to keep their doors open and serve their communities”

A representative from the Anaerobic Digestion and Bioresources Association (ADBA), said: “As the impact of the gas crisis intensifies, diversification of the liquid CO2 supply will be crucial to the success of many critical industries. Evidence shows that anaerobic digestion (AD) can be a solution. The AD industry already supplies up to 90,000 tonnes (approximately 15% of demand) of bio-CO2 each year, and with the right support, all of the biomethane plants currently in operation across the UK could supply well over industrial demand. In the face of multiple crises, AD has the potential to produce low-carbon renewable sources of CO2, fertiliser, and perhaps most crucially, gas.”

Notes to editors:

The UK uses 600,000 tonnes (600 million kg) of liquid CO2 per year for the food and drink industry.

The cost of liquid CO2 was £150 per tonne a year ago. Some companies are being quoted £3000 per tonne at the moment. If today's high prices were maintained for 12 months then the annual cost of liquid CO2 to the food and drink industry may rise from £90 million to £1.8 billion. This means an extra bill in the region of £1.7 billion as long as gas prices stay high (which they are expected to do until the end of 2024).

Analysis by ECIU showed that in 2021 UK farmers could have faced an extra bill of £160 million for fertiliser due to the high cost of gas.

BEIS quarterly energy statistics for Q1 2022

Information on liquid CO2 costs (provided by British Beer and Pub Association):

Costs have increased dramatically over the past 12 months and whilst things appear more settled of late, they remain much higher than at this time last year and when, prior to the closure of the CF Industries plants at Billingham and Ince, CO2 prices were around £100/tonne.

With the re-opening of Billingham costs increased in line with increasing gas prices and we saw some significant variability with a high of around £1000/tonne at the end of December before dropping back to around £400/tonne earlier this year.

In recent days, one of our regional brewer members who has a requirement for 20 tonnes of CO2 a week to operate, overnight saw their quote for supply increased by 360%, taking their delivery cost from £13k up to £60k. If sustained over the course of a year, the cost to the business for CO2 alone would have increased from £800k to over £4million.

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: