Gas supply fears spark price warning

6 January 2010

6 January 2010 | Jake Kanter

UK energy buyers must be vigilant of rising gas prices as demand starts to outstrip supply in the icy weather.

Concerns about gas availability were raised on Monday after the National Grid issued a “balancing alert”. This is a signal to the market that demand must be reduced or more supplies may be needed to avert an emergency across the network. It is only the second time such a warning has been issued.

The Conservative party said yesterday it believed the UK has only eight days’ supply of gas left in storage.

Utilities experts remained confident the UK is well supplied but fears over shortages are pushing up prices.

“The system of bringing in gas is coping very well in the cold weather,” said energy consultant Chris Lewis. “Alarm is driving up prices, but they are very low compared with the past four years because the market knows the availability is there.”

Wholesale gas has jumped from around 35p per therm in December to approximately 45p per therm today. While this is a rise, it is substantially lower than this time last year, when prices reached around 60p per therm.

Mark Callaway, energy markets director at utility procurement consultancy Power Efficiency, said there is enough gas to meet UK demand and, although costs have risen, a price of 45p per therm is not cause for alarm.

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