Gas prices follow oil hikes

24 July 2008
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25 July 2008 | Paul Snell

UK gas buyers will face higher prices, according to research.

The increases will come as a result of a fall in domestic production and an increased reliance on European supplies, where a linkage between (currently high) oil prices and gas rates will cause a hike.

In a report, analysts Eclipse Energy Group believe the link would result in a "significant increase" in gas prices, although still below the price of oil.

Advisory firm Cambridge Energy Research Associates (CERA) said an alternative to linking the gas price with the oil price had not yet emerged.

Reflecting on the studies, watchdog Energywatch said gas prices should mirror the cost of production and prices should be set according to supply and demand.

Both reports added purchasing from other sources, such as Liquefied Natural Gas (LNG), could provide some relief for buyers.

"LNG can provide an important diversification of supply for European gas purchasers," said Catherine Robinson, director, European gas at CERA.

And energy consultant Chris Lewis said buyers should be careful about trying to lock in contracts now, because if the oil price bubble bursts, buyers will suffer.



SMjul2008

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