Gas Prices

This week has seen British Gas raise its gas prices by a record 35% (with some customers facing an even bigger rise) this is their 2nd rise this year on the back of a 15% rise in January. This comes just after EDF also put there gas prices up by 22% and it's only a case of time before the other energy suppliers follow suit. Soaring wholesale energy prices are blamed with prices this winter estimated to be up 89% on last year. The UK is also suffering from diminishing gas reserves which means we will import an estimated 40% of our gas this year compared to 27% last year. The price of gas has also gone up so drastically as it is linked (in Europe) with the cost of oil. There is some debate over whether the fact the cost of gas being linked with the cost of oil is a good thing. In America for example, the price is gas-indexed as opposed to oil - indexed and the price does not differ much in the long run. There are periods when gas indexed prices are higher and vice versa, however gas indexed prices are more volatile than oil mainly because it is more difficult & expensive to store gas than oil. If we were to change to gas indexation, prices would not necessarily lower (other than the immediate short term) and would definitely create problems of price volatility and higher risks. Oil indexation is a protection against any major exporters monopoly power, prices based on oil indexation remove market power from both buyer & seller eliminating the ability of any one player to influence prices. For more information on this debate have a look at : http://www.energypolicyblog.com/?p=171

As consumers there are two things we can do to save money, use less fuel (or make our homes more efficient) and switch to a cheaper supplier. Some suppliers also offer long term fixed contracts ( at a premium initially). There are plenty of price comparison websites out there, you could have a look at the energywatch website for an impartial view, however when I checked yesterday they were still showing British Gas as the cheapest for dual fuel in my area despite the 35% rise which I find hard to believe, so try http://www.uswitch.com/ http://www.simplyswitch.com/ or http://www.moneysavingexpert.com/ . Millions of households have already switched but half the UK's households have yet to switch! If you're worried that after you've switched your new supplier then raises their prices you are only tied to any company for 28 days so for best deals you might need to review say once a year. If you have never switched and are still with British Gas or the company that took over from your regional electricity board you are likely to be on their highest tariff and could save more than a hundred pounds by switching.

Much has been made about the profits that these companies make (although profits are expected to drop this year) the average profit made on a duel fuel customer over a year is estimated as low as 50/70 pounds a year, the profits made come from the transportation, buying and selling to the national grid, additional services such as boiler cover, phone & security services, broadband & some supplier are now even looking at water as being a future investment. The big six suppliers will undoubtedly be pressurised by the government to do more help to those classed as being in fuel poverty but they are also under pressure to increase the percentage of energy supplied from renewable energy. In 2005 only 4% of the UK's energy supply came from renewable energy and the government target is 10% by 2010. Scottish & Southern Energy last year made an estimated 1billion pound profit but spent 1 billion buying Airtricity who develop and operate wind farms, so as a company and individuals there is a balance to be found, we can't have it all ways!