Gas prices could rise by up to 80%, independent energy consultant EIC has predicted.

The firm claims volatility in wholesale markets has resulted in substantial increases in contract renewal prices for gas.

It put the price increase down to contract energy suppliers adding a “risk premium” to reflect the volatile market.

EIC said that price increases of this magnitude would damage the profitability of many organisations. In December 2004, leisure operator Centre Parcs’ share price dipped after it warned higher energy prices would damage profitability.

EIC said the increase would also affect wholesale electricity prices, which are linked to the price of gas because of the increasing number of gas-fired power stations.

The shortage of gas reserves in the UK means that suppliers are now forced to compete for gas globally against the US, continental Europe and Asian markets.

The EIC forecast intensive users of gas will shift from one-off contracts negotiated every 12 or 24 months to a continuous ongoing buying process.

Source

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