Understanding the Fluctuation of UK Gas Prices

With the decline of North Sea gas production the UK went from being self sufficient and an exporter of natural gas to being a net importer. This has caused many changes to the UK gas market, mainly in business and commercial gas prices volatility.  Back in the days when the UK was self sufficient for natural gas few factors influenced gas prices. They were weather and demand, nowadays, the UK gas market has become more complex and several factors have a direct effect on prices.

Since 1998 when the first pipeline between the UK and Europe was opened UK gas prices were automatically hooked to European oil indexed prices. Since then, UK gas prices were determined by marginal transactions. Basically if oil prices raise so does UK gas prices.

Recently a new factor has come into play which brought a more global component to business and commercial gas prices, the imports of LNG (liquefied natural gas) cargoes. According to industry experts, over time LNG imports could account for 50% of total UK gas supply which will make UK gas prices compete with American and Asian markets.

The biggest issue with LNG imports nowadays is where to store it so a number of LNG import terminals are under construction, with two new large terminals in Wales due to be completed later this year and further expansion at Isle of Grain near London.

Weather and demand still have their influence in business and commercial gas prices. But this winter gas traders saw a different scenario; with temperatures way below seasonal average which pushed gas for heating consumption to sky high levels, wholesale gas prices dropped.

Normally with the colder weather gas price tend to rise due to an increase in demand. This winter a steady supply from Norway and the Netherlands plus strong LNG imports kept the gas prices at low levels.

“Before trading gas in the UK Market was rather simple. Now things have become more complex and we have to keep an eye on several factors in order to deliver the best prices for our costumers” stated a business gas broker.

To sum things up, natural gas is an important factor of the UK fuel mix in electricity generation and it has great influence in UK energy prices.

If you would like more information on our range of business gas services or how we compare gas prices, 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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1. Gas is basic thing for everyone and that’s needed in every factors and when you going to change your gas service so that will be very effective for you and that’s the reason for Fluctuation of UK Gas Prices.

   Comment by Kevin Byrne — February 2, 2011 @ 10:37 am

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