logo
   Web Issue 3499 July 6 2009   
spacer
Gas bills wont fall soon despite oil price slide

Households were warned today not to expect falling gas bills any time soon despite the recent slide in oil prices.

Crude oil fell to its lowest level since April yesterday, but wholesale gas prices for the coming winter still stand above £1 a therm - double last year.

The elevated wholesale costs have already prompted two rounds of price hikes this year from the UK's "big six" energy firms, heaping further pressure on stretched family budgets.

The average dual fuel bill for gas and electricity has risen to £1283 from £912 at the beginning of the year, according to consumer watchdog Energywatch.

As a net importer of gas the UK must buy part of its supply from the continent, where gas prices are linked to oil.

But crude's recent highs are still being reflected in the wholesale price due to the time-lag in forward supply contracts.

James Allpress, an analyst at energy data company ICIS Heren, said: "Falls in the oil price don't immediately translate in to falls in the wholesale gas price.

"When the oil price changes, the price movements tend to affect the UK wholesale gas market with a delay of months.

"This winter's wholesale UK gas price already has the high oil price built in, though if oil prices continue to fall, we should see that reflected in falling gas prices next year."

Other factors which have kept wholesale prices high include a leak on a major North Sea pipeline discovered by Norway's oil and gas producer Statoil Hydro two weeks ago.

The firm closed the pipeline, which pumps an estimated 5% of Norway's total gas output, and warned it could remain shut until next spring.

The UK is highly exposed to supply disruptions because it lacks gas storage compared to its European neighbours, but is also facing increasing global competition for liquefied natural gas (LNG) imports due to demand elsewhere.

Mr Allpress added: "Other factors which could push up UK gas prices even when oil prices fall, include unexpected offshore problems in the UK North Sea and the failure of LNG shipments to arrive due to higher prices in Asian and US gas markets."

The falling oil prices are also set to offer little relief to motorists at the petrol pump because the current weakness of the pound makes the wholesale cost of petrol - priced in dollars - more expensive.

Soaring energy bills have caused headaches for the Bank of England's efforts to control inflation. The official Consumer Prices Index benchmark reached 4.4% in July and is set to peak at around 5% in the coming months - hampering the attempts of policymakers to aid a slowing economy with rate cuts.


© All rights reserved. Reproduction in whole or in part without permission is prohibited.


spacer
 IN YOUR AREA
 
Travel Shop
Airport Parking
Travel Insurance
Car Hire
Copyright © 2009 Newsquest (Herald & Times) Limited. All Rights Reserved   
Sitemap :: Circulation :: Syndication :: Advertising :: About Us :: Terms of Use