Personal commentary

Journal article

Not so long ago I was invited by my gas supplier to enter into an agreement to fix my unit charge for gas for the next five years. I assume that it was a general invitation to all British Gas customers; possibly competitors were making similar approaches.

This has caused me, and no doubt many fellow consumers, to face up to the dilemma confronting industrial and electricity generating users of gas; do we buy on the spot market or do we buy forward? What is going to be the course of gas prices over the years? And of course it has raised the question in my mind – what does British Gas think about these questions? One might think that British Gas is expecting prices to fall back. But we domestic consumers are offered a break clause in the event of a price fall. So what is British Gas up to? Perhaps it is hoping to lock in customers for the long term back to back with its long-term purchase contracts. But this only works if the price of gas is going to rise. If it falls British Gas is stuck with high prices under its purchase contract and a defecting clientele. So do we conclude that British Gas is taking a gloomy view of the path of future gas prices?

Authors: Henderson, C

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford Institute for Energy Studies
• Journal: Oxford Energy Forum
• Volume: February 2006
• Issue: 64
• Pages: 19-19
• Publication date: 2006-02-01
• Edition: Publisher's version
• ISSN: 0959-7727
• Language: English
• Keywords: OIES