Energy prices hit 27-month high

PRICES IN the wholesale energy market jumped to their highest level since October 2008, as the recent adverse weather conditions and the nascent global economic recovery increased demand for energy.

The Bord Gáis Energy Index, which measures prices in the wholesale energy market, hit 137 last month – a 27-month high. Prices are now 37 per cent higher than the same period last year.

The Bord Gáis energy index tracks trends in the wholesale energy market, focusing on oil, gas, coal and electricity. The price increase last month was mainly attributable to a combination of rising oil prices as a result of global demand, and a spike in British natural gas prices because of the prolonged spell of cold weather in Britain and Ireland.

Oil prices rose $8.83 in the month, settling at $94.75, the largest monthly increase in crude oil prices since May 2009.

This is primarily explained by strong demand from the US and China.

Natural gas broke above the 60 pence per therm level on December 2nd for the first time since February 2009.

Coal moved from $114 to $124 per tonne during December because of the cold weather, and the reduction of the export capacity of Australia and Indonesia due to flooding.

Electricity prices also increased due to plant availability issues and the rise in the cost of the dominant price-setting fuels, gas and coal.

Michael Kelleher, energy trading analyst at Bord Gáis Energy, said that oil demand could reach record levels in developing economies in 2011, resulting in short-term spikes towards and beyond the $100-per-barrel level.

However, he pointed out that Opec appears to be committed to keeping long-run average prices at about $90 per barrel.