Today’s Gas Glut and Yesterday’s Contracts: The British Gas Predicament

In the frst half of 1995 the UK gas market underwent a price shock. At the beginning of the year gas had been trading on a short-term basis in an informal telephone market at a level of around 18- 19p/therm. This was approximately in line with the average long-tenn contract prices paid by British Gas (BG) and other wholesale gas purchasers and which account for the overwhelming proportion of sales. On a calorific basis these price levels were also comparable with oil prices in the range of $15-18 barrel. By March the price for short-term – or “spot” – supply had weakened to around 14p and in April prices collapsed to 9p. In term of the percentage decline in price the fall can be compared to the collapse in oil prices of 1986. A supply surplus had been foreseen by the industry and consequently a weakening of prices had been expected, but the scale and speed of this price movement appear to have caught many commentators and market participants by surprise.

By: M. Stoppard

Latest Tweets from @OxfordEnergy

  • Oxford Energy Podcast – LNG Plant Cost Reductions 2014–18 https://t.co/Fd9U19aoqn

    January 18th

  • A review of new OIES study on LNG as shipping fuel: Northern Europe seen most substantial development of LNG as shi… https://t.co/VbioNQyn8B

    January 18th

  • New OIES study on LNG supply chains and development of LNG as a shipping fuel in N.Europe: LNG bunker fuel has not… https://t.co/NZIoe4uRxF

    January 16th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.