Can Industrial Action Impact Your Energy Costs?
Over the past few months, the UK's oil and gas sector has faced uncertainty due to offshore workers in the North Sea voicing their grievances, escalating to the brink of potential strike action. This growing unrest within the workforce has cast a shadow over the entire industry, carrying possible implications for the nation's energy market.
The individuals in question are pivotal in extracting fossil fuels from beneath the North Sea. Any disruption could significantly impact production and send ripples through the supply chain. Balancing the concerns of offshore employees with the need to maintain fuel stability could pose a delicate challenge for both oil and gas firms and the UK government.
This article delves into the current influencing factors and examines their potential ramifications for British enterprises and their energy expenses.
Why are Offshore Workers Angry?
The Unite and RMT unions, which represent the workforce, have been in talks with employers to achieve higher compensation.
Over 700 Unite union members recently settled their ongoing disagreement with Bilfinger UK, having agreed on an enhanced pay agreement. The planned offshore strike, initially set for June, was deferred as employees opted to vote on the improved proposition presented by the offshore engineering company. Workers believed that their remuneration and working circumstances did not adequately mirror the challenging aspects of their roles within the offshore sector.
Unite general secretary Sharon Graham said: "The deal only came about due to the determination of our members to secure a fairer wage offer demonstrated by their bravery in taking strike action. The deal shows that workers can take on the oil and gas operators and contractors, and win.”
Following the Unite general secretary's statement, a further 600 employees of Stork announced their intention to strike on multiple occasions throughout July 2023, with the backing of RMT and Unite. The BBC subsequently revealed that the planned strikes would be postponed while union members deliberate on a new compensation offer from Stork, who acted promptly to prevent significant disruption. The offshore service provider also retroactively pledged to implement the proposed pay increase from January 2023.
What is the Impact of Strikes on the Sector?
In the earlier months of 2023, strikes led to disruption across multiple installations in the North Sea, resulting in some installations ceasing operations entirely.
An estimated 10,000 personnel will be on duty offshore at any given time, engaging in diverse responsibilities like upkeep and decommissioning inactive installations. The primary workforce usually spends several weeks away from British shores, and the North Sea holds pivotal significance as a vital energy contributor to the UK market.
Could Strikes Influence Energy Costs?
Similar to numerous industries, supply and demand fluctuations influence energy rates for UK households. In principle, the occurrence of production interruptions that lead to a supply reduction while demand remains steady could trigger a price upsurge. We don’t need to go too far back in history to uncover clear demonstrations of this connection.
As the UK economy recovered from the COVID-19 pandemic, there was a surge in energy demand as businesses re-opened their doors to the public. The supply couldn't keep up, leading to a shortage and subsequent cost increase in 2021.
The Russian invasion of Ukraine at the beginning of 2022 exacerbated this unfortunate circumstance, which heightened the risk to gas provisions and intensified the surge in prices. There's also a connection between the escalation of electricity and gas costs. Even though 40% of the UK's electricity stems from renewable sources, a substantial portion of it is intertwined with gas-generated power within the national grid.
Ultimately, disputes could enable notable disruption in fuel supply. Such an interruption could influence the energy market. However, labour unions and contractors appear to be negotiating efficiently enough to avert this scenario and mitigate the potential risks.
How Can You Save Money on Your Energy Bills?
With so much concern about energy sources and market volatility, consumers are looking for ways to save money on their bills more than ever. At UKPower, we can help you compare gas and electricity suppliers to find the cheapest energy prices, switch to a better deal and cut the cost of your energy bills.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.