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Energy Insights: Energy News: Gas price hike inevitable - UK

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Gas price hike inevitable - UK


29-12-2005

Dehavilland.co.uk

The managing director of British Gas, Mark Clare, has admitted that rising gas prices are "inevitable" in 2006 as wholesale gas costs continue to increase.

At a time when ice and snow have hit parts of the UK, concerns have been raised about wholesale gas prices once again rising to the record levels reached earlier this winter.

Additionally, gas suppliers have been concerned that the UK could face a gas shortage this winter as output from North Sea fields decreases and the majority of new import projects do not begin until 2006 and 2007.

Since the beginning of October, spot gas prices have risen by three pence per therm to over 150p by November. Wholesale electricity prices have also risen from around 40p per Mwh to over 100p, meaning larger gas and electricity bills for consumers.

Speaking to the Today programme, Mr Clare indicated that gas prices will continue to rise in 2006.

"I don't think anyone forecast the extent and the degree to which wholesale prices increased and unfortunately if we look at the wholesale price forecast for 2006 they're something like 50 per cent higher than they were a few months ago," he said.

"If you look at the forward market prices they're pretty high both for early next year and for the next winter as well."

He continued: "With wholesale prices where they are, all suppliers are going to have to put prices up in 2006, and I think that is inevitable."

However, Mr Clare maintained that British Gas is still focusing on reducing costs as fast as possible to put a cap on price prices over the coming months.

Asked if the supply of gas will remain secure this winter, Mr Clare responded: "Obviously it depends on how cold it gets and we can only rely on the Met Office forecast.

"What they've effectively said is it'll be a one in ten winter [the type of winter experienced in Britain once in every decade], and a one in ten winter can cope with that quite well, as long as we don't have some associated infrastructure failure."track

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