Schizophrenia in the British gas market

October 3, 2006

NOTE: Images in this archived article have been removed.

British energy customers must be wondering when the continued bad news of price increases will end. In a mini-version of “Peak Oil” in the UK, the sceptred isle will become and stay a net oil and gas importer next year. Retail suppliers of energy had been fearfully locking in prices for gas and electricity earlier this year but are now caught out by the drop in natural gas prices over the Summer. In fact, the new gas pipeline from Norway has been sending so much gas in their testing phase that the price dropped to -5p a therm as they gave the stuff away!

Here is the graph for wholesale gas below:

Image Removed
Customers want to know when they will benefit from these lower prices. The answer is most likely early next year as the higher priced hedges expire. Talk of price gouging once again pervades the media but the fact is that a combination of a rapid downside to UK Peak Gas and too much hedging by companies caused all of this.

Britain is a microcosm of Peak Oil in two senses. One is the fact that their reserves peaked in 1999. The second and more ominous is that few saw it coming. UK Peak Oil arrived silently and took the energy gurus by surprise. These so called experts also predicted Britain would be a net energy importer by 2010. The surprise decline in North Sea production has now brought that forward to 2007. So much for the experts and expect a repeat performance for worldwide Peak Oil.


Related articles:


UK energy bills rocket amid supply fears

Press association, Guardian
Household energy bills have almost doubled in the past three years as the UK struggles to meet demand due to dwindling gas supplies in the North Sea.

The average house now pays 90% more for gas and 60% more for electricity than it did in 2003, with the combined cost of both more than £1,000 a year.

The increases have left households across the UK struggling to pay bills and have led to fierce criticism from consumer groups and politicians.
(3 Oct 2006)

Gas traders start giving it away
BBC
A glut of natural gas supplies in Britain has seen prices collapse and left traders having to pay for it to be taken off their hands.
(3 Oct 2006)


UK To Be Permanent Net Oil Importer In 2007

Dow Jones via Cattle Network
LONDON – The U.K. is set to become a permanent net importer of crude oil and refined products in 2007 – three years earlier than the U.K.’s Department of Trade and Industry expects, according to the U.K.-based Oil Depletion Analysis Centre Monday.

Depletion rates of the U.K.’s oil and gas reserves in the North Sea are occurring faster than expected and production coming onstream in the next few years from new fields won’t be enough to compensate, said ODAC director Douglas Low.
(2 Oct 2006)


Tags: Fossil Fuels, Natural Gas, Oil