Ghastly gas prices
July 23, 2008 at 4:09 pm
After the well-known supplier npower revealed that they would be increasing the price of their gas by 17.2%, other energy providers have followed suit. In the last week or so, British Gas has revealed its preparations to increase its gas prices by a further 15%. It is said that this exorbitant increase could “[affect] its 16 million customers within a matter of weeks”. It is suspected that this increase is linked to the rising cost of crude oil, a shortage of supplies from abroad and a prodigious increase in wholesale energy prices.
On the 24th of June the cost of oil was just $139 a barrel. Since then, the price has increased to $147 a barrel, an increase of $8.
Not only does this put demands on other gas and electricity providers, it also puts tremendous pressure on customers. Despite the so-called fuel poverty crisis and criticism from charitable organisations such as Age Concern and energy regulators such as Ofgem and EnergyWatch, the cost of fuel has continued to increase and energy suppliers show no sign of reducing their costs.
If we reduce the amount of petrol we use, the oil we save can be used as domestic fuel. In order to do this, we could follow the example of Mozambique’s upcoming plans to use natural gas-powered vehicles. However, although this method is cheaper, using natural gas to fuel cars is no more than a temporary solution. The high cost of running vehicles in Europe is not only attributable to the cost of oil but also to the high cost of petrol (the price of fuel after tax is 80% more than the price of fuel before tax). Nevertheless, if there is little or no improvement over the next few years (i.e. if there is still a shortage of oil), there may be proposals to emulate such measures.
There have been proposals to implement large offshore wind farms. As the UK is an island, this idea has great potential.
It has been suggested that the UK could reopen coal pits; this could be because clean coal technology is improving continually and is reducing the pollution effects. Furthermore, the Chinese and Indian demands for coal could allow us to generate revenue that could fund clean fuel technology. Companies such as Norway Statoil are using the revenue generated from shipping over oil and gas (for example, by using their new deep-sea pipeline between Norway and the UK) to invest heavily in new, eco-friendly, renewable energy sources. This approach not only ensures the long-term future of their company’s revenue, it also has a beneficial impact on our environment. This shift is industry-wide – for instance, British Petroleum (BP) has recently given their company the ‘Beyond petroleum’ tagline.
In view of the current position that our country is in, it is unlikely that the price of gas will decrease in the near future. Times dictate strategic action.
Two giant gas companies face collusion charges
July 8, 2008 at 3:03 pm
With the price of gas exploding all over the world, we are having to tighten our belts in order the pay the bills. However, news this month has revealed that two of the largest gas companies in Europe are in big trouble, having been accused of teaming up in secret, in order to keep the prices as high as they can.
The German company E.On and the French company Gaz are in deep trouble with the European Commission for allegedly colluding with each other over the gas supply coming from Russia. The collusion would have been to avoid the other from out-pricing them. The Megal pipe is the main route for importing gas from Russia and it runs through all of Eastern Europe, through Germany and then into France. But it’s the Germans who will be the ones that might lose the most money over this collusion as it’s their main source of gas supply.
The pipeline is a huge source of energy for Europe. Over 40% of Europe’s gas now comes from Russia and through hugely profitable pipes such as the ones owned by E.On and Gaz. The monopoly these giants have over the pipes means they can pretty much charge what they like and, if they have been teaming up in secret to avoid competition, then the prices could go up and up.
The European Commission is currently investigating the case and if the two companies are found guilty then the punishment could be a fine of 10% of their annual global turnover for every year they have colluded with each other. The worry is that this punishment might make the matter worse and force the bills to rise even higher.
Major gas and electricity providers face committee over price increases
July 1, 2008 at 2:50 am
Gas and electricity companies are rumoured to be raising prices by 40% in the next few months, despite already raising them by 15% this year. They were expected to face tough questioning in front of a Parliamentary Committee last week to find out why.
The defence that the bosses of Britain’s main energy suppliers plan to use is that the price rises are out of their control and they are expected to blame the hikes on the dramatic increase in cost of crude oil and natural gas.
In 2007 the average household paid £924 for gas and electricity but according to independent gas and electricity watchdog, Energywatch, consumers could now see their energy bills rising to over £1000 per year.
The price of crude oil has doubled since the end of last year and wholesale gas and electricity prices have gone up since the start of this year alone by 82% and 64% respectively. This cost unfortunately gets passed onto the consumer and one energy expert estimates that Britain’s major energy suppliers would need to raise prices by between 30-40 per cent this year to maintain their profits.
Despite all this, the Department for Business Enterprise and Regulatory Reform (BERR) issued a statement earlier this year saying that the UK has the most competitive energy market in the EU and G7.
A few of the Chief Executives who will be facing the Committee of MPs, which is expected to address a range of issues as well as this, are from major British energy companies such as Centrica, Scottish Power, Scottish & Southern Energy, Welsh Power, E.On, EdF Energy and RWE npower.
