Fall in gas demand means a good Christmas for Brits
August 26, 2009 at 2:09 pm
Amid the doom and gloom of economic predictions comes some good news for gas users in the UK. Both forecasters and producers are admitting that British residents’ gas bills will be noticeably lower come this winter. The drop in price comes as a direct response to the present lack of demand across much of the world for the fuel. That, combined with the ubiquitous impact of the global recession and the overabundance of liquefied natural gas (LNG) in the fuel market, will mean that it could be at least mid-2010 before the value bounces back up.
It could have been a different story if it weren’t for the UK’s liberalised market. Britain is only one of two (the other being the USA) countries which has kept its gas market completely open, allowing for competition to totally dictate its value. Most of the world’s nations are attached to long-term contracts, at fixed prices, with various oil indices. This means that even though gas prices are at present plummeting, their citizens wont receive any of the financial benefits.
Mass gas producer BG Group has recently pushed back its estimated production targets, from Christmas this year to March 2010. Analysts are warning that holes in the global gas market are starting to appear and whilst BG say they are optimistic that they will hit company growth targets of between 6-8% a year, the recent fall in demand has seen their profits drop by 31% and their share price by 29p to 1053p.
So whilst things might not be too cosy for employees at BG Group and the rest of the world’s gas producers and distributors, at least we can stay warm this winter without feeling the financial heat.
British Gas sees 16% profit rise
August 21, 2009 at 3:52 am
British Gas saw profits rise by 16% in the first half of the year, according to The Telegraph. This has come mainly as a result of much lower wholesale gas prices, which have managed to combat the problems the company has faced lately, in terms of the overall reduction in power consumption.
British Gas is the supply arm of Centrica, which has also done well during the first half of the year as its revenues were up 1% to £11.7 billion. But this has mainly been due to the good performance of British Gas. Centrica has now announced that it is going to focus more on the US and UK markets, and pull out of its operations in the rest of Europe.
Sam Laidlaw, the chief executive of Centrica, said that although gas consumption is down 6% and electricity down 1%, “we compensate for that with our services business which is growing strongly”.
The profits made by British Gas have prompted many to call for lower bills from the power company. Its profits of £299 million in the first half of 2009 are deemed by many to suggest that the company is perfectly capable of making more cuts to help out the customers who have been hardest hit by rising bills over the past winter.
British Gas has already cut its bills this year, reducing them by 10% in May, which helped it to bring in an extra 120,000 customers. However, many now think that the company can do a lot more to help its customers.
'Energy crunch' looming as North Sea oil and gas exploration down
August 17, 2009 at 2:51 am
Oil and gas exploration has dropped by 57% in the North Sea over the last six months. This news comes courtesy of the industry group Oil & Gas UK. It appears that increasing costs and a lack of funding have led companies to reduce their new projects in the recession. The chief executive of Oil & Gas UK, Malcolm Webb, said that “last year we had the credit crunch, next year we are looking at an energy crunch”.
Investment is down by £1.2 billion in the industry in the last two years, meaning it is currently at £4.8 billion. However, there are fears that this could go down even further to below £3 billion by next year. This is bad news seeing as investment of £5 billion a year is needed if exploration is to continue.
Now there are real fears that the lack of exploration may lead to billions of barrels of oil being left in the ground. A significant two thirds of the UK’s energy needs are currently met by domestic oil reserves, so a fall in domestic production is going to be very serious. Less investment could lead to only 11 billion barrels of oil being extracted out of a possible 37 billion, and production could drop to supply only 12% of the country’s demand.
Oil companies are now asking for tax breaks which have so far not been forthcoming. There are also real concerns that 50,000 jobs could also be lost, which would be a huge blow to the economy in the current recession.
Gas bills cut by E.On
August 7, 2009 at 4:38 am
There was good news for E.On customers last week as the company announced that it is cutting its gas bills by 3.3% to UK customers. This will mean savings of about £25 a year will be made by the average household, which is at least some comfort to those who are currently struggling to pay their bills.
The changes have already come into effect, and 1.8 million customers are set to benefit from the bill reductions after all the rises that took place throughout 2008. The reduction in gas bills follows on from the cut in electricity bills by 9% in April, and will also be joined by the announcement that 200,000 meter customers will see their £1 standing charge disappear after the company announced last year that it would be doing this.
However, despite the company’s claim that it is “committed to offering competitive prices at all times”, there are some who do not see the cuts as going far enough. E.On posted an 18% rise in quarterly profits in May, and the small cut to bills will not seem like much to struggling customers.
Will Marples from uSwitch.com said that it is moving in the right direction but that it was not enough for those feeling the pinch. This follows a report released a few weeks ago by Consumer Focus that claimed customers were being ripped off by the big energy companies due to a huge reduction of wholesale electricity and gas prices. Still, despite prices remaining high it is now hoped that more cuts by other power companies will follow throughout the year.
