Understanding the Fluctuation of United Kingdom Gas Prices

With the drop of North Sea gas production the UK went from being self sufficient and an exporter of natural gas to being a net importer. This has induced many changes to the United Kingdom gas market, in the main in business and commercial gas prices volatility.

Since 1998 when the first pipeline between the United Kingdom and Europe was opened UK gas prices were automatically hooked to European oil indexed prices. Since then, United Kingdom gas prices were determined by slight transactions. Basically if oil prices raise so does United Kingdom gas prices.

Recently a new determinant has come into play which brought a more global component to business and commercial gas prices, the imports of LNG (liquefied natural gas) cargoes. According to industry experts, over time LNG imports could account for 50% of total UK gas supply which will make United Kingdom gas prices compete with American and Asian markets.

The greatest issue with LNG imports nowadays is where to store it so a number of LNG import terminals are under construction, with two new large terminals in Wales due to be completed later this year and further expansion at Isle of Grain near London.

Climate and demand still have their influence in business and commercial gas prices. But this winter gas traders saw a different sequence of events; with temperatures way below seasonal average which pushed gas for heating consumption to sky high levels, wholesale gas prices dropped.

Normally with the colder weather UK gas prices tend to rise due to an increase in demand. This winter a dependable supply from Norway and the Netherlands plus strong LNG imports kept the gas prices at low levels.

"Before trading gas in the United Kingdom Market was rather simple. Now things have become more complex and we have to keep an eye on several factors in order to deliver the best prices for our costumers" stated a business gas broker.

To Conclude, natural gas is an important factor of the United Kingdom fuel mix in electricity generation and it has great influence in United Kingdom energy prices.