14 April 2005 | David Arminas
Purchasers must get used to playing the commodity markets or risk paying over the odds for long-term energy contracts.
According to Martin Rawlings, deputy chairman of CIPS Energy Committee, the energy market is now much more dynamic, and buyers have to respond.
"Gone are the days of fixing your yearly energy costs on a single day at the price on that day," he said.
He also advised purchasers to look for shorter contract periods.
"These days the markets are so volatile that many issues, such as a problem in Palestine, or even the Pope's death, affect oil prices.
"Buyers must get used to the wild fluctuation and if they set their contracts on a day of high prices they could be big losers. They must now get used to playing the commodity market."
In his view, continued high energy prices will be driven by the economic growth of China and India, increasing demand for global oil production.
"The time of a $30 barrel of oil will not come back and it could hit $80 for a short time," he forecast.
Crude has been trading at around $57 a barrel, but Investment bank Goldman Sachs predicted at the end of March that oil markets are in a "super-spike" phase where prices could surge as high as $105 a barrel.
Rawlings added that high-energy user sectors such as petrochemical, steel, smelting, plastics and airlines are most at risk.