If gas and oil prices are linked, why is the price of gas still so high?

[manwithnoname]

The Gas companies told us the reason why gas was so expensive was because the price is linked to the cost of oil. So the cost of oil has gone down by about 60% since July why haven't gas prices dropped?

[Funkstar]

I'm not sure i completely agree with the first part of that.

There are probably links between the two, but I would just say that they are two comodities that have similar pricing structures rather than being linked. It is all based on supply and demand, although I think gas is more likely to be bought and sold on contract pricing rather than market pricing.

I would expect to see gas prices drop, but a bit delayed compaired to oil, just like the rise in prices was delayed vs oil.

Don't take this as gospel though, this is just off the top of my head

[Barrichello]

Forward contracts, oil being purchased on exchanges such as the IPE. The big boys buy in the oil up front, so if you can imagine we been using oil that was brought back when it was say $100+ a barrel, and as times goes by we get down to todays cheaper stuff. Not sure how they work it out etc, but this is part of the reason we always see a delay/lag in seeing the current price differential reflected in our bills.

[manwithnoname]

I'm not sure i completely agree with the first part of that.
...

I don't agree with it but it true...

http://www.centrica.co.uk/index.asp?...39&newsid=1176

Phil Bentley added: "Our energy market is now part of a much bigger picture. The UK gas market is competitive but is now fully linked to Continental Europe where the gas market is less competitive and prices are linked to oil prices. As oil prices have increased, so has the cost of gas across Europe, and this has hit the UK."

Forward contracts, oil being purchased on exchanges such as the IPE. The big boys buy in the oil up front, so if you can imagine we been using oil that was brought back when it was say $100+ a barrel, and as times goes by we get down to todays cheaper stuff. Not sure how they work it out etc, but this is part of the reason we always see a delay/lag in seeing the current price differential reflected in our bills.

Just how long should the delay/lag be, I think Joe public is be taken for a ride..

[Saracen]

.....

Just how long should the delay/lag be, I think Joe public is be taken for a ride..

I don't know how long it should be, but I;ll take a guess at how long it will be. Any price drops won't take effect until about March time ...... comfortably after the winter period, and when the scope for profiteering .... sorry, I mean "demand" has dropped off.


Not that me= Charter Member of Cynics Anonymous or anything.

[Kumagoro]

I remember reading that the problem is that we don't store gas we extract. As such we sell it
cheaply to continental europe in the summer and buy it back for more during winter.

What a bunch of mugs we are.

[Funkstar]

I remember reading that the problem is that we don't store gas we extract. As such we sell it
cheaply to continental europe in the summer and buy it back for more during winter.

What a bunch of mugs we are.

Gas storage isn't exactly easy. You either liquify it at great espence and then have the problems of storing vast quantities of LNG then further expence of converting it back to regular gas. Or you have a good few thousand (probably hundreds of thousands) gas storage tanks dotted around the country.

Stopping or slowing production during off peak times isn't a good thing to do anyway, it would probably push up the cost of the gas you do recover because of in efficiencies and problems with the offshore production facilities.

[coco]

The Gas companies told us the reason why gas was so expensive was because the price is linked to the cost of oil. So the cost of oil has gone down by about 60% since July why haven't gas prices dropped?

Rip off Britain, with the energy supply cartel mugging the consumer as usual

[badass]

Gas storage isn't exactly easy.

Yet europe copes fine with several months worth of gas storage.

FYI Britian has about 2 weeks of gas storage.

[Jagleman]

Europe buys it up when its cheap in summer - stores it - then sells it to us in winter coz we dont have our own!!!