The latest Quarterly Energy Prices report, published by the UK\\$quot;s DTI, revealed average industrial gas prices were over 65 per cent higher in the first quarter of 2006 than in the first quarter of 2005.
The report also demonstrated how average industrial electricity prices have been pushed around 50 per cent higher over the same period, due to the use of gas in electricity generation. Industrial users have thus seen far greater rises in costs than those suffered by domestic consumers.
The DTI's European Union data for January 2006 showed that for the most energy intensive electricity users, only Italy had higher electricity prices than the UK; similarly for gas prices, only Germany and Austria, by a small margin, experienced higher gas prices.
The Chemical Industries Association (CIA) supports the work by Ofgem and DTI to minimize the economic damage caused by possible gas shortages, reflected in high forward prices. It emphasizes the benefit of Ofgem and DTI continuing to work with the EU Commission to ensure that UK consumers can have access to the same contractual terms as their European competitors.
CIA identifies the need to maximize supplies reaching the UK this winter through the Isle of Grain Liquefied Natural Gas importation terminal and via the pipelines from Belgium, The Netherlands and Norway; stressing that it is important to ensure that any restrictions on consumption are applied in the least damaging way, with full compensation for those affected.
Steve Elliott, chief executive of CIA, believes that in the long term there is an ever more apparent need for a large expansion in UK strategic gas storage. This would help balance the big seasonal variation in demand and avoid the need to increase gas import requirements at the same time, as gas is at its most scarce throughout the northern hemisphere.
Elliott commented: "Uncompetitive energy prices are undermining the viability of many chemical sites as it is now impossible for companies to contract ahead at prices which allow their business to avoid losses. Our members' ability to trade and invest is assisted by predictable and competitive pricing. Right now wholesale gas market prices in the UK offer neither of these fundamental requirements."