Keeping an eye on energy

28:00You can find that episode on BBC Sound. Search for Big Boss Interview. Thank you for your messages this morning, particularly on questions about the Middle East as we get the very latest on there. We've got Niamh McBurnie with us, who's Head of Political Analysis at control risks for the Middle East and North Africa, based in Dubai herself. And Niamh, we've had a few points coming in along this line that Andy in London has got in touch with, and people have been talking about this quite a bit this week as we talked to so many people who are based in the Middle East. So I don't know to what extent you can answer this question or not.

28:33But Andy says, please mention when speaking with people in the Middle East that it is illegal for them to criticise the UAE government, which may frame their answers. Niamh, I mean, as somebody who works in policy and political analysis, and you're having to make for the Middle East and North Africa, so you're having to make policy sort of conclusions yourself, what are the rules there when you're based in Dubai as you are?

29:00Sean Farrington:So there's a law that governs this, and it was brought out, I think it was over 10 years ago now. Actually, I know exactly when it was brought out. It was brought out just after the Arab Spring. It was kind of 2012, 2013, in response to the explosion of use of social media and concerns by the UAE government and other governments across the region had had the same laws as well. Because they were concerned about the spread of what they defined as misinformation. Now, governments of all types have different perceptions of what misinformation is or isn't. That's separate to disinformation. But are we operating in a controlled media environment?

29:52Yes, the UAE is a controlled media environment.

29:56Sean Farrington:and media outlets have had their knuckles wrapped over things that they have said, you know, in various points. I'd like to reassure your listeners that I work for a UK headquartered, independently owned risk management organisation. And our advice and what I'm telling you is what I tell all our clients. And it's subjective and it's unbiased. And, you know, the most important thing for myself and my colleagues is to make sure that we're telling our clients what is accurate. I don't know if that's helpful. It is helpful. It's helpful to have you on the program. I appreciate you answering that question.

30:37Andy, I appreciate your message as well. And I just had a look at the gov.uk, you know, the foreign travel advice for, for example, if you were traveling to the United Arab Emirates. And when it's about posting online, for example, it is illegal to post material, including videos and photographs online, that is critical of the UAE government, companies or individuals, or which relates to incidents in the UAE. This includes material which appears to abuse, ridicule or criticise the country or its authorities. Material that is culturally insensitive may also be considered illegal. 85058, do keep your messages coming about what is occurring in the Middle East, questions about the consequences of all of that.

31:19We're going to be talking about energy prices as well as we try to get to the bottom of what these moves in gas prices in particular that we've seen in recent days might well do for bills in our households, for businesses around the UK. And also, there was a big meeting yesterday Rachel Reeves had with a lot of energy bosses. Could there be a change on the way for taxing those companies that produce oil and gas in our own North Seas? 85058, you want to join in that chat? Please do. 25 to 6. We focus on the part of the internet that most people don't know about. It's called the dark web. Undercover in the furthest corners of the dark web, US special agents are on a mission to locate and rescue children from abuse.

32:06Move in now. Peace! From the BBC World Service, World of Secrets, the darkest web follows their shocking investigations. Listen on bbc.com or wherever you get your BBC podcasts. Wake Up To Money with Sean Farrington. Good morning to you. It is Wake Up To Money on BBC 5 Live 85058. Do keep your messages coming about whatever it is. we're discussing on the programme today, but we have had lots come through regarding developments in the Middle East and what that means, energy prices for where we get our energy from, fuel prices as well. You may well have noticed prices at the pump changing in recent days.

32:52We have Swetha Ramachandran, who's with us this morning, the Global Equities Portfolio Manager, RBC Blue Bay Asset Management. Swetha, I know we've talked about big oil price moves in the last few days, but we've actually seen them over the course of this year, haven't we? Which may be why people feel like prices at the pump are higher than they once were anyway. Yeah, absolutely. If we look at crude prices, just in the last month alone, they're up about 20%. And some of this has been, I mean, I think the Middle East conflict was somewhat flagged as a possibility as early as January. And so there was some anticipation of the situation in advance.

33:29Of course, nowhere near as severe as once the conflict actually got underway. And so that has created a bit of inflationary pressure for oil prices and certainly for consumers as well at this current time. And how do you view these gas prices this morning that, you know, every so often we watch very, very closely and we become familiar with the pence per firm that is the wholesale price. And when we see a look at the chart this morning of what happened yesterday, you know, it came off a little bit, but still a lot higher than it was just a few weeks ago and has been for a while. So 128 pence a therm for natural gas, as we'd look at the price from here in the UK.

34:08Does that mean the mood's changing? Well, certainly, if we just see there's fixed price deals, it's emerging that actually there were about 38 fixed price deals at the end of last week. That's now come down to about 17. So providers are becoming a lot more nervous about the impact of providing consumers with these fixed price deals at a time when their input prices are becoming increasingly unclear. And as far as the OBR is concerned, their forecasts were struck on a price per therm that is below where we are today. So that's also adding to a little bit of inflationary pressure and that potential narrowing of the fiscal headroom that we see here in the UK.

34:47Yeah, and one consequence of that that's made a few headlines in the papers today, that the Times golf crisis could force a rate rise. Interest rates could go back above 4 % if the conflict in the Middle East causes these prices to remain elevated for a long period. That's according to the National Institute of Economic and Social Research, NISA, and again, the mail interest rates to climb above 4 % on the back of that report. So that could be one consequence. David, David Hall, Managing Director of Brita UK. Do you know when your business energy contracts are up off the top of your head? Is it something that you've been refocusing on this week as prices move?

35:27Not this week. We generally sort of tie ourselves into a fixed price over, you know, anywhere between sort of six and 12 months, depending on how we negotiate with our suppliers. so at the moment we're kind of isolated a little bit but the issue for us is whether it's just a temporary spike or whether it becomes something that's baked into the you know baked into the long term because if it becomes baked into the long term then it's not great for us as a as a manufacturer or for as i was saying earlier for consumer confidence well let's have a look at what could happen next with energy prices and where we get our energy from gas prices as we've mentioned there have shot up since the start of this US-Israeli war with Iran.

36:13Jonathan Brearley is the chief executive of Jem. Yesterday he told MPs it's still too early to tell how much energy prices could rise as a result of the conflict. Although we remain at the early stages of this conflict, if the Strait of Hamuz remains closed for a prolonged period of time, it is likely that this will create significant upward pressure on prices that customers will pay for their gas and electricity. For example, in electricity, gas still sets the price for the majority of the time. Now, at the same time, same day as he was talking to MPs there, Rachel Reeves, the Chancellor, had a meeting with bosses, particularly energy bosses from right across the energy sector.

36:55And the main thing to come out of that meeting yesterday seemed to be that she was reaffirming her commitment to end the windfall tax on North Sea oil and gas production. Now, there's a plan in place for that to disappear by the end of the decade and there'll be another way of taxing that industry that will kick in next year. But could it be that there's been a bit of a change in sentiment over how quickly that might come about and how much more the government might encourage some North Sea oil and gas production as well? Anna Moussa is the Executive Director for Policy and Engagement at Renewable UK, the body representing the UK's renewable energy industry.

37:35So, of course, very different part of the sector to North Sea oil and gas production. Anna, good morning to you. Morning. Different part of the sector, but not necessarily different companies and different conversations and different people around the table. What do you make of developments here that we may well be turning more attention to production in the North Sea than we previously were? So I think we definitely need an energy security situation like the one we're finding ourselves in. We need to make sure that we have all forms of generation available to us to be able to meet demand and to keep prices low.

38:12So we think that makes sense. But it's really important to remember that gas is traded and it's priced in international global markets. So it means that the price is not domestically set, even if you extract it in the North Sea. And we've been really clear with government and other stakeholders that if we want cheap power, it needs to be homegrown. And it can't be something that's traded in global markets because otherwise we can't control the prices. So why then, Anna? Oh, go on. Sorry. Sorry. No, the line just dipped a bit. I thought you'd finish. Carry on. Sorry. So, yeah, it's really important to remember that reliance on gas has really costed us quite a lot over the last few times when we had energy crisis.

38:56in 2022 when Russian gas to Europe was cut off. The UK only imported 1 % of its gas from Russia, but we felt 100 % of the impact of the price shock, which really tells you how sensitive we are to these global price shocks. Can you explain, Anna, why that is? The way our energy pricing works, where it can be that so little of the energy we're using and a given day, a given week is from gas, but yet so much of the energy we're paying for is based on that gas price. Why does it work that way? Let me just briefly explain how our wholesale markets work. And it's based on a principle called the short run marginal cost.

39:42So on any given day, the system operator needs to buy enough generation in order to meet demand. And what it will do is it will start by buying the cheapest form of generation that's available out of all the offers out there. And usually that's wind and solar. On some days, that meets 100 % of the demand. And that's great. That's a day with pretty low wholesale prices. If that doesn't meet 100 % of the demand, you then move on to buy the next most expensive generator, which usually tends to be nuclear. If that still doesn't meet all of your demand, then you tend to move to the most expensive generator that's available on that given day.

40:17And that tends to be gas. And this last unit that you use to top up to meet your energy demand sets the price for everything. And that's why we're seeing gas set the price for all electricity in the UK. So why is that the case? So because I appreciate this is a very complicated thing and thank you so much for the concise, clear explanation of how that works. But why is it we don't just pay the price for wind and solar and then the price for nuclear and then if we really need to and gas prices are high but it's the last bit, we just pay high amounts for that bit of gas that we need? There have been many discussions on this.

40:54You won't be surprised about whether we should have separate markets for all these forms of generation. I think after a lot of research, it's really been clear that you might not end up saving as much as you think you would, which I know sounds really counterintuitive. But the principle that we operate in wholesale markets is we want to have as much liquidity. So everything is operating in one single market. If you start splitting these off, then you might have smaller markets with less competition and prices, again, could shut up because of that. So there are incentive consequences for all of those people working in wind and solar and nuclear and the North Sea or whatever.

41:33If all of a sudden you change that, it can have a big ripple effect. So I very much appreciate just having that interlude to explain that there, because that is, as we talk about our future production of where we get our energy from, that is sort of a key part of this. Just going back, Anna, to what you were saying about then where we go next right now. When you see after this meeting yesterday, the government talk about and the government source after these talks saying the crisis in the Middle East has had real time consequences on oil and gas prices. And it's right that we respond to this with regard to potentially changing windfall tax in the North Sea.

42:10But that won't do anything for prices, will it? It might do something for energy security that you talk about and perhaps jobs and tax revenues. but if all of a sudden they change the rules on production in the North Sea, would there be price changes? I think it's really hard to imagine a situation where we'll see price changes straight away. As I've mentioned, it's a global market for gas. Whenever we extract gas here, we can't just export it to the UK at a lower price than the global prices. And in addition, we also need to make sure that those companies that operate in the North Sea, yes, we want them to be able to invest.

42:51We have some supply chains that we use for both oil and gas and renewables. There are job implications, as you mentioned. So that makes a lot of sense. But from a price perspective, we probably won't see the impact straight away. What we need is to reduce our exposure on gas in the UK. Because as I've mentioned, gas has the price of electricity not all the time. But in the UK, it's about 85 % of the time. If you compare that to France, in France, gas set the price of electricity about 7 % of the time. And in the EU, the average is 55%. And that's the sort of the long term case that we hear very often.

43:27And we see that is effectively the government policy to move towards that electrification and not needing so much gas. David, is it somebody paying bills in your home and for your business? David Hall, the boss of Brita UK, who's with us this morning. What do you make of the energy policy that we have had? And then all of a sudden we see prices move in a week like this and the government's talking about potentially, I don't know, could the windfall tax on North Sea oil production be reduced sooner than previously thought? What do you make of the whole approach? The whole approach? Well, I can certainly say I've learned something this morning from Anna exactly how the pricing works.

44:07And it's a complicated system. I think, you know, from a pricing perspective, we don't tend to sort of worry too much about, you know, exactly what's going on behind the scenes there. It's really sort of what are we faced with and what decisions do we have to make based on the prices that we see? I mean, the one thing that I would sort of throw into the mix, we're talking a lot about prices. We're talking about energy volatility. You know, for us, we're a company that focuses quite a lot on sustainability as well. And, you know, if there's any good that can come out of, you know, fossil fuel price volatility, there's a little bit of a hope inside me that that drives us more towards a sustainable fuel agenda.

44:50You know, so more renewables would be really lovely. Anna, we're going to have to wrap this one there. But just to reiterate what David said there, particular thanks for the explanation of how the pricing system works. I know sprung that upon you in the middle of our conversation, but it really did lay out and give a sense of what this conversation is really all about. So much appreciated. No doubt we'll talk again as these things develop. Anna Moussat there, who's executive director at Renewable UK 85058. I've got a few more questions coming in. Swetha, I did want to ask you, Swetha, as mentioned a little bit earlier, just to change topic a little bit.

45:29Broadcom. Tell us who they are, why they're making headlines and what that's got to do with the world of AI at the moment. Sure. So Broadcom is a chip manufacturer, which is trying to position itself in competition to NVIDIA and obviously plays an important role in the AI development in terms of the picks and shovels aspect of it, not necessarily the front facing the consumer facing open AIs or Google's and Microsoft's of the world. So what they've been really trying to do is to position themselves as a core infrastructure partner for many of these hyperscalers. And so what they reported yesterday was pretty much record growth in revenues.

46:13And they're targeting, again, they're seeing no slowdown in spending, which again, points to the fact that at least the AI investment, even if you may call it a bubble, is still very much underway with the hyperscalers all kind of engaged in almost an arms race to outspend each other on AI. And all of that means that even while their own returns may be uncertain, we don't know what returns the hyperscalers might be getting from their investments in AI. The beneficiaries of the spend, which are more downstream, such as the likes of Broadcom, are seeing a huge benefit. So that's really what's going on.

46:46And there's been some concern about the whole AI complex since the start of the year. So we've seen, for example, after a very strong 2025, share prices in the MAG-7 stocks have not been great since the start of the year. And yesterday's results from Broadcom are somewhat of a reassurance that this AI investment is still on track. So I think that is also helping Asian markets this morning in particular. So perhaps a little different to the news that we've heard in recent months. David, I've got a very specific Brita question for you, but it's an intriguing one. So I'll let you answer it. Darren says, morning, Sean.

47:19As you've got the Brita MD in, could you ask him if they have plans for a home under sink water filter for the standard tap without adding a separate tap to remove the forever chemicals from water? Now, we don't need a big sort of product list answer, David. But that concept of that, is there ever innovation going on there? I will answer that question sort of with it's certainly a very interesting area for us to be investigating, but I can't commit to actually launching something in the immediate future. But it's definitely something that we continue to look at. I mean, for us, we've got a very strong legacy business that's built on jugs and filters that go into jugs.

48:04And we're constantly looking at what's the next sort of wave of innovation that we would allow us to bring to consumers to obviously continue to grow jugs and filters, but also to provide other solutions that have similar benefits to our core products. There you go, Darren. You've got your answer straight from the man in charge at Brita. Thank you for your question. Fascinating. 85058. Keep them coming. Let's talk travel now, particularly around the Middle East in and out of it at the moment. British nationals stranded in the Middle East have begun flying home on government flights from Oman with more planned for this week.

48:39Jake's from Bedford. He was in Dubai for a work trip, finally managed to make it back to London on a commercial flight from Muscat yesterday afternoon after having crossed over the border from the UAE. It's not quite hit me. I think there's still a degree to which I'm going to stay at a shock. It's quite surreal. We got to the Omani border, got picked up by a friend on the other side. Immediately, I was feeling more relaxed being out of the UAE. There was actually a scare on the way to Muscat from the Amman border. The US embassy put out a shelter in place warning. So there was a moment where I thought that we were out of the frying pan into the fire.

49:15But fortunately, we made it to our accommodation, got up in the middle of the night to start trying to look for flights back to London. Eight and a half hour extended trip. The plane had to take a slightly longer route to get around the conflict zone. there was applause in the cabin and I felt just a great rush of relief that we weren't going to be trapped away from home for too long. Now we've got Joanna Reeve with us who's the UK Director at Intrepid Travel. Joanna, morning. What is it that you're having to do at Intrepid Travel? What do you do there and how is it being impacted by what's occurring in the Middle East at the minute?

49:51Hi, good morning, Sean. So at Intrepid, we are a global tour operator. We have thousands of trips running around the world globally. A huge volume of those are either in the Middle East or we rely on airlines to transport our travellers either to destinations in the Middle East or through the Middle East. So in short, this is the worst travel disruption that we've experienced since... COVID quite frankly just due to the sheer uncertainty and volume of customers impacted so our teams have been busy around the clock in the UK contacting customers or receiving queries from customers as well as teams on the ground supporting them and so far they're doing a great job but a very anxious time for everybody.

50:42What's the biggest sort of theme that you've seen within these calls that you're getting in recent days? I think it's just sheer uncertainty so we have customers that are on the ground we have 200 customers um within the middle east in egypt and jordan um in particular so we've been most of those uh have all come home now um all of them are accounted for and we're assisting those left to get home currently um but we're getting changing bookings at all you know if you've got a holiday in easter time for for egypt booked are people are you getting people calling up going we actually just want to change location yeah we are getting a lot of that um which is which is understandable and we are looking at rerouting people changing airlines for people if we can and switching destinations because uh there are still destinations that are very safe to travel to europe in particular so thankfully we are we are able to find alternatives but understandably people are really concerned and where is it where is the sort of the demand moving to at the moment well asia um because we can avoid the conflict zone going to Asia, but closer to home, Europe and the Americas in particular.

51:51We've seen some people, but as far as Australia and New Zealand, anywhere that seems to be avoiding the transit hubs via the Middle East. Right, interesting. And just in terms of longer term impacts here, based on your experience of the travel industry, will there be long term reputational issues for routes and destinations? Yeah, I think so. The longer term implications are, I mean, this is going to be very much airline led. Huge volumes that go via Doha, Dubai, Qatar. And the information we're getting from those airlines is they're dealing with such a huge backlog. So they have to deal with those that are immediately affected, returning those home.

52:34And then, of course, with every day that passes, there are flights that were due to depart and arrive. So I think there's going to be a huge knock-on effect. Their prices will go up through other airlines that people are seeking alternatives via. And I just want to spend our last minute checking in with Ian Scott. He's stranded in Doha. We were chatting to him on Wake Up To Money earlier this week. Ian, where are you at? How's things? Yeah, it's OK, thanks. Still in Doha, actually. No route out via, you know, the sort of Qatari airspace. So it's, you know, five, six days now it's coming up to.

53:10Stuck here. Prospects? Prospects, we've hatched a plan. Today, I'm getting an eight-hour drive from Qatar all the way across the Saudi desert to Riyadh, where tomorrow morning I'm getting a flight from Riyadh to Jeddah and then from Jeddah to Istanbul and then from Istanbul to get myself back to Venice. So it's a little bit nervy. As the chap you spoke to earlier, we were about to do that. We've sort of worked it all out ourselves. And we're going to get in a car at 3 o 'clock this afternoon and hopefully be on a range of flights and cars and everything to get us home. Well, Ian, we'll keep in touch with you.

53:51Have a safe trip. Hope you're all OK. Ian Scott, who is keeping us up to date. Really appreciate the time, Ian. Sorry we couldn't talk more. Big thanks to Joanna as well. And to Swetha, Niamh, David. And for all of your questions, do keep the coming 85058. That's it from us. Wake Up To Money from BBC 5 Live That's it from Wake Up To Money You can download the podcast every Monday to Friday So please make sure you subscribe We'd also love it if you left us a review When you do Get in touch Keep the conversation going anytime as well On social media Use the hashtag Wake Up To Money 5 Live Sports The Six Nations Rugby's greatest championship What a day of the Six Nations it's been

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54:58We focus on the part of the internet that most people don't know about It's called the Dark Web Undercover in the furthest corners of the dark web, US special agents are on a mission to locate and rescue children from abuse. Move in now. From the BBC World Service, World of Secrets, the darkest web follows their shocking investigations. Listen on bbc.com or wherever you get your BBC podcasts.