Energy costs: the only way is up
8 Apr 2013
Burton on Trent, UK – Energy costs for businesses increased by 7% in from January 2012 to December 2012, according to the latest data from the Lorien Energy Index (LEI).
The statistics also show a 5% increase in electricity and more than 12% in gas tariffs during the final quarter of 2012. Heavy and gas oil fractions have remained fairly static with little movement.
Following this increase, the Index stands at 4.57 for Q4 with an average of 4.38 for the year. This sees the LEI almost back to its previous peak of 2008.
This, said Lorien, reflects mounting pressure in the energy supply market for further price increases, which would impact on commercial deals during 2013 and over the longer term.
OFGEM is currently predicting wholesale prices for both gas and electric will trend upwards through spring into summer.
With falls in both UK oil and gas production of around 12% during 2012, a medium to longer term reliance on imports is stimulating the drive for newer technologies such as the controversially viewed fracking for shale gas and a push towards new nuclear capacity as resilience and costs become real issues.
Increases in the costs of supply and distribution networks alongside environmental policy and support for low carbon and renewable alternatives have led the the Office for Budget Responsibility (OBR) to conclude that prices will follow ‘a long term upward trend’.
Recently published research carried out by the Government demonstrate that the cost of energy to business will be 22% higher by 2020 as the result of these policies alone, on top of an estimated 30% of today’s costs.
Derek O’Neill, director of Lorien Engineering Solutions Ltd, said: “The LEI continues to show an upward trend in 2012 running well ahead of inflation and further significant price rises appear inevitable.
“Events such as the recent pipeline failure at one of the UK’s terminals, which caused wholesale gas prices to spike temporality, add to the volatility of energy prices within the UK.
“Further suffering is coming from the weak strength of the pound, having an additional effect on commodities traditionally traded in US dollars.”
