Gas Price Warning as Cold March that Leads to Short Supplies Essay

Gas Price Warning as Cold March that Leads to Short Supplies - Essay Example This has generated a decrease in the supply of the gas in the UK resulting in an increased demand for gas. This increase in demand is mostly expected during March, the coldest seasons in Britain. Due to an increase in demand, prices of inputs also go up which leads to the increase in the production cost. Secondly, the electricity blackout is the other key point where the supply and demand cost of production concepts are applicable. The article illustrates â€Å"there was a very real risk of the lights going out within the next three years† (Harvey, 2013, p.1). This was so because SSE intends to shut down its power plants due to high operation cost making the stations uneconomical, which would result in electricity shortage. This will reduce the supply of electricity to the nearest 2million homes that are being supplied by SSE. The shortage in power supply will lead to a rise in demand for alternatives such as gas leading to increase their prices. Due to this increase, input prices will also go up, which will, in the long run, create a foundation for a rise in the cost of production of goods and services in Britain. Thirdly, another issue is the outsourcing or importation of gas from the outside UK. With the encroachment of the cold season in March in the UK, The demand for the gas increases, but due to low supply from UK suppliers, the prices will go up making the country import gas from other countries like Russia and Norway. As illustrated by Spulber (2009), this will increase the cost of the production as the importation of the gas will lead to increase in the cost of inputs, which will further lead to increase in the input prices hence higher cost of production. Lastly, the cold snap, which is expected in the month of March, is a key point in the article with two economic concepts applicable to it. During this cold season, most people keep their houses warm  throughout the day by using various heating mechanisms. This cold season always leads to increasing the demand for various heating mechanisms.