Wholesale energy prices rise 8%

The Bord Gáis Energy Index of wholesale energy prices rose 8% in July, the biggest monthly increase since Feb 2012, as oil prices rose on supply concerns and expectations of additional economic stimulus measures to battle global weaknesses.

Along with rising fuel commodity prices, the ongoing weakness of the euro played a significant role in the monthly rise in the index. As a result, it now stands at 144, an increase of 4% on Jul 2011.

Power trader at Bord Gáis Energy, John Heffernan, said: “Despite the global economic backdrop, wholesale energy prices increased in July, with gains recorded in the wholesale price of oil, gas, coal and electricity. In July we saw the vulnerability of fuel commodity prices to threats in global supplies or supply failures.

“A combination of industrial action in Norway and Columbia, together with escalating tensions in the Middle East, pushed prices higher.

“The euro performed poorly against its rivals during the month and lost more ground to the US dollar and British pound, which impacted negatively on eurozone commodity buyers,” he said.

Mr Heffernan warned that any future market shocks could be amplified in Ireland due to the falling value of the euro.

In particular there are fears that oil prices could increase as a result of the Syrian crisis. The oil element of the energy index was already up 10% to 157 at the end of July.

Markets fear that Iran’s response to declining oil exports could result in disruption to the West’s oil supplies. Also, if neighbouring countries get dragged into the Syrian conflict, it could destabilise the region and oil supplies.

Natural gas prices have also increased. The natural gas element of the index was up 4% to 201. The bulk of the month-on-month increase was due to the ongoing weakness of the euro versus sterling. Ireland purchases its gas on the wholesale markets in the UK and a weakening euro makes those purchases more expensive.

UK gas prices rose due to a Norwegian pensions dispute at the start of the month which raised the possibility that Norwegian oil companies would lock out workers on the Norwegian Continental Shelf and potentially shut down Norway’s entire offshore oil and gas output.

A Colombian railway strike over pay and conditions also drove up the price of Irish coal transported by the railway company Fenco. The coal element of the index was up 12% to 131.