The wholesale price of oil was the main contributor to a 2% rise in the Bord Gáis Energy Index (BGEI) for July 2011. The Irish index now stands at 139 up from 135 in June. The upward year-on-year trend for wholesale energy prices continues as the Energy Index is now 24% higher than in July 2010 and 55% higher than in July 2009.
The following are the key trends recorded for the month of July:
Oil: The oil element of the Index is up 5% to 150. Brent crude oil prices rose 6% in the first week of July as the commodity recovered from the International Energy Agency’s decision in late June to increase supply by releasing 60 million barrels onto the market from its reserves. Prices then stabilised between $116 and $119 for the remainder of the month, and closed up 5% at $116.74. Bord Gáis says sovereign debt issues in both the EU and the US contributed to uncertainty in oil prices in the latter part of the month as the markets became increasingly concerned about the outlook for the global economy.
Natural Gas: The natural gas element of the Index is down 2% to 180 and prices finished the month averaging 55p/therm. Lower levels of demand than anticipated for the season, together with steady LNG (liquefied natural gas)arrivals to the market combined to drive prices lower. In addition, storage facilities in the UK and on the continent are filling faster than in previous years reducing the demand for gas during July. This also contributed to the softening of prices.
Coal: The coal element of the Index is up 2% to 147. Coal prices were little changed in July due to low summer demand combined with plentiful stockpiles at Amsterdam, Rotterdam and Antwerp ports, the main distribution hubs in Europe. Scandinavian hydro-generation levels improved due to heavy rains, which further diminished the demand from the power generation sector. A week-long mass strike by 150,000 miners in South Africa has not yet had an effect on European coal prices due to the market being well supplied from other sources such as Colombia, Russia and the US.
Electricity: The electricity element of the Index is down 2% to 109. July saw a drop in Irish power demand as is usual during the summer period due to the warmer weather. Wind generation fell by 25% compared to the previous month. However, the electricity market saw good availability from efficient, lower cost generators and the net result was a small fall in wholesale electricity prices for July. This minor reduction is a seasonal variation and is not unexpected in the summer period. However current future gas prices are significantly higher this winter than last, and therefore the electricity element of the index is expected to increase in Q4.
Michael Kelleher, Energy Trading analyst at Bord Gáis Energy, said: “A rise in oil prices combined with a weakening of the Euro versus the US Dollar and Sterling pushed the Bord Gais Energy Index 2% higher for the month of July. Economic and geopolitical issues were the main reasons for the increase in oil prices. Despite fears surrounding US and European economic growth, oil moved higher as a result of strong Chinese demand and the continuing instability in the Middle East.
Despite the very recent and significant movements in the markets, we would anticipate an increase in the Energy Index in Q4 on the basis of the current futures markets. The futures markets are currently placing more emphasis on increasing demand for oil in China, and the likely increase in demand for gas in Germany following the decision to end nuclear power generation in the country, than on the ongoing uncertainty about the Eurozone economy. The potential for further unrest in the Middle East is also lending support to higher future oil prices. The futures markets also point to wholesale gas price increases with prices for this winter currently more than 30% higher than last winter.”
Car running cost up 5.8%
Separately, an annual survey of motoring costs sponsored by the Automobile Association, shows that the cost of running a family car rose is up 5.8% or €646 in 2011 – - about double the rate of inflation.
A car of between 1,251cc and 1,500cc engine capacity costs €11,817 a year to run, compared with €11,171 in 2010. This includes all motoring related costs, from depreciation to interest on capital to servicing and petrol.
“The single biggest change is the cost of fuel,” said the AA’s director of policy, Conor Faughnan.
“In June 2010, petrol cost 133.3 cent per litre, but by June this year that had risen to 151.7 cent,” he said.
This represents an increase of nearly 14%, “something that motorists are certainly feeling in their pockets.”