Gas Prices To Go Up 25pc Due To Extra Oil Tax

Extra Oil Tax Cuts Down Profits of Oil and Gas Companies – During the 2011 Budget pronouncement, Chancellor George Osborne announced that the supplementary charge tax on UK oil and gas production was to be increased from 20pc to 32pc. Up until now oil and gas companies operating in the North Sea were rather quiet about the tax surge but have recently made public that their profits were slashed and energy and gas prices will rise.

The tax increase brought even more insecurity to the unstable UK energy industry. Big suppliers like British Gas owner Centrica, have already warned it may partially shut the UK’s biggest gas field as a result of the tax.

Last Wednesday, 4th of May, CEO’s of Britain’s largest oil and gas suppliers tried to persuade the Government to abandon a £10bn tax grab on North Sea energy companies, amid warnings the levy will “utterly destroy” the industry.

Speaking to the government’s cross-party Energy and Climate Change Select Committee industry representatives threatened that 30,000 jobs are at risk due to the uncertainty raised by the windfall tax.

The Energy Minister, Chris Hune and Justine Greening, Economic Secretary at the Treasury who were also at the hearing stated that the effect on jobs is pure speculation, because the impact on investment was not yet known

According to Greening, George Osborne used the independent Office of Budget Responsibility (OBR) analysis to calculate the tax and concluded that the effect in investment will be minor.

Writing for the Telegraph, Andrew Lilico, Economist with Europe Economics, and a member of the Shadow Monetary Policy Committee said that claims by oil and gas companies that it is going to shut down the North Sea are just silly.

First, let’s remember that Petroleum Revenue Taxation (PRT), including the “supplementary charge” on corporation tax that Osborne raised, isn’t like taxes on widgets or socks or ice cream. It isn’t, as with most taxes, a matter of the government confiscating a portion of someone’s property to use for government purposes (worthy or not). No – it’s the Queen’s oil, not the oil company’s. PRT is simply the way that the oil company pays the Crown for the right to take away and sell that oil. It’s an alternative to a royalty, and can be thought of in much the same way. – Andrew Lilico

It is widely known that tax increases reduces incentives to invest and cut down profit margins from companies affected by the scheme. One way or another, companies find a way to pass this to the end customer in order to minimise the effects on their profit margin.

Centrica has already stated that wholesale gas price for delivery next winter has gone up 25pc because of the jump in commodity prices but has not yet been passed on to customers.

What baffles me about all this is that over the past two year when Brent crude oil prices surged from $80 to $125 a barrel and the profit of these Oil and Gas companies nearly doubled, they kept quiet and even managed to increase oil and gas prices due to one reason or another.

Let’s not forget that the majority of the oil and gas being explored today in the North Sea is fruit of investment planning made a little over a decade ago when oil prices were around $10 per barrel. So to say that a 32pc supplementary charge will shut down the North Sea with Oil prices at $100 per barrel is frankly absurd.

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Energy Market Report May 2011

Our monthly analysis of the UK gas and power markets is now available on line for the month of May 2011. The service is intended to keep you up to date with all the major news in Europe’s gas and power markets. It is also designed to keep power executives focused on market activity in an easy to digest format.

Your find our May 2011 report here and all historical energy reports can be located here.

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Energy Market Report April 2011

Our monthly analysis of the UK gas and power markets is now available on line for the month of April 2011. The service is intended to keep you up to date with all the major news in Europe’s gas and power markets. It is also designed to keep power executives focused on market activity in an easy to digest format.

Your find our April 2011 report here and all historical energy reports can be located here.

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Should Britain Turn its Back on Nuclear?

The catastrophic events in Japan that led to Fukushima’s nuclear crisis made the world review their concepts about nuclear energy generation. What once was seen as an effective way to generate carbon free electricity is now being questioned about its safety that will sure comprise its economical viability.

What happened at Fukushima’s nuclear power plant caused deep wounds on the nuclear industry, forcing governments in every corner of the globe to review their nuclear development policies.

As countries around the globe start to decarbonise their economies, nuclear power is seen universally as a vital and cost effective carbon free energy generating resource. But new safety policies and other costs for new and existing nuclear power plants could turn nuclear power less economic or even uneconomic.

The nuclear industry has a strong safety record and there is no reason to believe that this cannot be maintained into the future but events in Japan have changed these parameters. Although we don’t have a detailed report of what happened at Fukushima nuclear power plant further improvements on the current high safety levels will sure be implemented and required by new nuclear power plants.

This leads us to the question: “Is it safe for Britain to go on building new nuclear plants?”

Writing to the telegraph Lord Hutton of Furness former secretary of state for Business, Enterprise and Regulatory Reform, 2007-8, answered this question with an emphatic “YES” stating:

“Safety must, of course, always be at the heart of the case for nuclear energy, and regulators must make this their top priority. In 2008, when I had responsibility for energy policy, the safety case was fundamental to my decision to sanction a new generation of nuclear power stations for Britain. I have every confidence that this will be the same approach taken by ministers today. Modern nuclear technologies have multi-layered safety systems in place that offer a huge improvement on the older power plants.”

With ageing power plants due to close in coming years, time is running out for Britain and nuclear power seems like the most probable solution to not only to keep the “lights on” but also to cut down carbon emissions.

If Britain turns its back on nuclear the Government would be limited to very few energy generating resources. Renewables would be one of them, for the delight of the energy secretary Chris Hune. The second option would be gas as it is unlikely that the Government would sanction a new coal-fired power plant.

Meanwhile one thing is for sure the nuclear crisis in Japan will result in rising business gas prices and consequently higher business energy prices as LNG cargoes are diverted to the Far East to fill the gap left by the Fukushima nuclear power plant.

To sum things up I leave you with the question: “Should Britain Turn its Back on Nuclear?” – Share your thoughts and opinions in our comments section.

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Energy Market Report March 2011

Our monthly analysis of the UK gas and power markets is now available on line for the month of March 2011. The service is intended to keep you up to date with all the major news in Europe’s gas and power markets. It is also designed to keep power executives focused on market activity in an easy to digest format.

Your find our March 2011 report here and all historical energy reports can be located here.

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The Importance of Hiring an Energy Broker

Every week we bring you the latest UK energy and gas prices. These prices vary on a daily basis influenced by a series of factors that we talked about in our article: “Understanding the Fluctuation of UK Gas Prices“. As professional gas and energy brokers it is our job to stay on top of the news in order to find the best deals for our clients.

Now imagine you having to do all this for your business or allocating employees that have no experience in the UK energy market, to find your organisation the best business energy and business gas prices. First you would be wasting time that could be used on other projects that matter to your business, and second these professionals wouldn’t be able to find you the best deals because they don’t have the market knowledge to do so.

That is why it is extremely important to hire independent energy brokers if you want to not only find the best energy and gas contract, but also improve the energy efficiency of your business.

Energy brokers have the market intelligence to understand and predict market conditions, therefore, finding the best contracts that will reduce costs and improve efficiency. Leaving you with the calm and tranquillity to focus on what really matters to your business.

There is nothing like a fresh pair of eyes to uncover areas for significant improvement that may not have been previously identified. Energy consultants have the advantage of working with many different organisations in various niches which make them versatile professionals capable of finding energy management solutions for just about any business.

Another factor that highlights the importance of hiring independent energy brokers is supplier relation. Here at Catalyst for instance we work on behalf of thousands of UK companies which give us a bigger bargain power when purchasing energy or gas from suppliers.

Before you ask if we were not going to bring you the latest gas and energy prices, here they are:

Gas Prices

Gas for Tuesday delivery rose 0.20 pence to 56.00 pence per therm at 1005 GMT, and day-ahead contracts gained 0.25 pence to 55.95 pence. Gas for April rose to 54.90 pence and gas for delivery next summer went up 0.05 pence and traded at 54.80 while winter gas surprisingly fell 0.15 to 64.35 pence.

Energy Prices

Day-ahead power gained 0.25 pounds on the previous session to 48.45 pounds per megawatt-hour (MWh).

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We need Innovation, Not Insulation Says Bill Gates

Conservation and behaviour change alone will not get us to the dramatically lower levels of CO2 emissions needed to make a real difference. We also need to focus on developing innovative technologies that produce energy without generating any CO2 emissions at all.

These are the words of Bill Gates about global warming and the global urge to reduce CO2 emissions. Recently we published an article about Mr. Gates quest to find a clean source of energy that will “save us” from the eminent threats of climate change. The man who revolutionized personal computing is now investing millions to stop global warming.

In his article “Why We Need Innovation, Not Just Insulation“, published on his personal blog “The Gates Notes“, he says right now the world has two goals for CO2 reduction – 30% (off of some baseline) by 2020 and 80% by 2050.

The first target seems to be more achievable and it is why we tend to focus on it. According to Bill Gates to achieve the 80% CO2 reduction goal by 2050 we will have to reduce emissions form transportation and electrical production in participating countries close to neutral levels.

But we would still be left with emissions from other activities such as domesticated animals, making fertilizers and decay processes. Not to mention that some countries will still be too poor to invest in new technologies to reduce their CO2 emissions.

That is when the problem grows more complex. As the demand for energy from poor countries increases and it is clear these countries won’t have the money to invest in the latest and green energy generation resources it will be hard to reduce CO2 emissions.

Reason why Bill Gates defends the theory that: “no amount of insulation will get us there, only innovating our way to what is essentially zero carbon energy technology will do it. If we focus on just efficiency to the exclusion of innovation, or imagine that we can worry about efficiency first and worry about energy innovation later, we won’t get there.”

Cutting a long story short, we need an “energy miracle”, a carbon free energy generation resource. Will we ever find it? Do you agree that we need innovations and not insulations to stop global warming? Have your say in our comments section.

If you would like more information on our range of energy services or would simply like to find out how this could benefit your business, simply call our energy team today on 0870 710 7560 or request a call back at time to suit.

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