There are many reasons why business energy prices fluctuate, especially business gas prices. Therefore, it can sometimes be hard to predict and plan your business gas prices. Remember that in the UK, there is gas that is produced in the country, but it’s not enough to keep the expanding number of businesses. Instead, gas has to be bought from other crises.
Unfortunately, with the political issues in Ukraine, there is now an energy crisis UK. And, climate change concerns are also changing how businesses utilize energy supplies. The government is encouraging businesses to reduce their fossil fuel use and even penalize heavy users. This article discusses business gas prices.
The UK gas supply consists of several sources to make sure that there is no short supply. Natural gas from the Irish Sea and the North Sea makes up almost fifty percent of what the country needs, though there is a decline in the quantity every year.
The country also gets some gas supplies by importing from across the globe. There are pipelines under the North Sea that deliver Liquid Natural Gas to refineries which are on the east coast. The UK has storage facilities in other countries, such as the USA and Russia. It’s worth mentioning that there are two types of these storage facilities, which are called salt caverns and depleted gas fields.
When there is low demand, gas can be transported into the storage facilities and utilized as a backup once there is a long period of cold weather, meaning there can be excessive demand on gas networks. Salt caverns, especially those that are turned into underground storage can usually be filled and emptied quicker than the gas in depleted gas fields. This is the reason why salt caverns are often used in emergencies.
Keep in mind that the cost of gas tends to be determined by several factors involved from production right through to your business premises. There are wholesale gas prices that refer to the cost incurred by your business gas supplier when it comes to purchasing gas from the original producers. This price usually varies because of market forces, though the gas supplier can calculate what they have to charge you without making losses. Crude oil and natural gas price charts can rise and fall when there are changes in global demand. And, a fixed-price energy deal needs to be at a price that should absorb the rise in prices while still making a profit.
In the UK, there are four key Gas Delivery Networks that handle and distribute gas to businesses across the country. Their role is to deliver gas safely, which can include replacing decaying pipes and repairing leaks. The costs related to providing this service also contribute to the final gas price for your business.
For years, businesses have been paying what is called the Climate Change Levy. This levy is simply an environmental tax that applies to the energy your business utilizes. It also applies to businesses in the public services, industrial, agricultural, and commercial sectors, and can be charged on lighting, heating, and power.
But, the government brought in several measures to make sure that energy-intensive industries, such as manufacturing are not at a disadvantage compared to foreign companies. Climate change is a field that is open to new and changing initiatives. A business needs to keep up to date on the new government legislation to ensure that they are compliant.
Gas suppliers also incur operating costs that come from maintaining equipment utilized to produce gas. This includes labor costs for all employees who do maintenance and modifications of machinery and other equipment. Remember that maintenance work is crucial if they need to avoid costly production downtime. By doing maintenance work, gas suppliers can prevent expensive repairs while keeping operating costs low in the long run. Operating costs can be high if a gas supplier opens a new field, but they can begin to decrease over time.
The factors that influence the wholesale cost of gas
Gas supply prices are not determined by just supply and demand. The cost of alternative energy sources, world politics, weather, and the use of renewable energy types can all cause the gas price to rise or fall. Gas is the main fuel utilized in central heating, so there is a lot of it that is utilized during cold weather. Because of this, wholesale gas prices are usually higher during cold weather than in hot weather. This means that you need to time your energy switch so that you can get better gas rates.
The UK also competes with other countries to purchase more gas during the cold weather, so the gas prices rise. Recent winters have been quite mild, leading to lower gas demand for heating.
Also, demand from businesses has been decreasing and energy efficiency has improved. As a result, the demand and prices have decreased, which is good for domestic consumers.
But demand for gas-fired power stations is expected to increase, and more electricity will be produced by gas than by coal plants. This may increase demand in the cold weather when there should often be a decline.
Currency movements usually have knock-on effects across many markets. And, this can either increase or decrease the whole price of gas. If the Sterling is stronger than the Euro, then traders can purchase cheaper gas supplies from the European market than doing in the UK. This can weaken the country’s prices leading to lower UK prices.
For years, LNG and oil tend to follow almost the same characteristics when it comes to price. However, there has been no or little correlation between the two since 2009. It is believed that the United States Shale Gas extraction may have contributed to this.
UK wholesale gas prices have been decreasing because of access to cheaper LNG imports. Likewise, oil price decreases have usually been followed by decreases in global gas prices. This benefited the UK business because the country was purchasing cheaper gas using the two pipelines that connect with the European gas suppliers.