04 November 2004 | Cara Whitehouse
Gas purchasers should abandon fixed-price contracts in favour of more flexible deals, according to a leading energy buyer.
Martin Rawlings, vice-chair of the CIPS energy committee, said the volatile market and rising prices meant buyers needed to re-assess their purchasing methods.
Rawlings, who is also managing director of energy consultancy Energytrak, said: "Gas is no longer cheap, so buyers should move away from fixed-price deals and opt for more flexible market arrangements."
He claimed the gas market could not sustain current prices and said the ability to "play the market" and buy at its lowest prices would benefit companies that may otherwise end up paying more than the market rate.
His advice came as record gas prices threatened to continue the escalation of business costs.
Despite a drop in prices during October, speculation persists that figures could further soar, with forward prices for January hitting an all-time record of 75p/therm, according to Rawlings.
At the heart of the problem is Britain's decreasing self-sufficiency, a result of dwindling North Sea gas reserves.
Rawlings believes the country could become a net importer of gas by as early as 2006.
Jeremy Nicholson, director of the Energy Intensive Users Group, said many energy-intensive companies had already moved away from fixed-price contracts to save money.
But he warned that not all businesses could afford to take the risk of flexible deals. "It depends what premium a company puts on certainty," he said.
"If you are quoting for products and services months ahead, you will need to know exactly what your prices will be."