2017 energy prices: uncertainty the only certainty

Posted: January 10, 2017 in Energy market, Energy prices, Energy procurement
Tags: , ,

The US Energy Information Administration (EIA) forecast in December that the 2017 oil price would average US$52, similar to current levels though double that of a year ago.

However, Forbes analysis recently found that past EIA forecasts varied from actual prices by 30-35%, and with other expert forecasts also not faring too well, predicting the future price of oil, gas and electricity is a pretty thankless task.

The variety and complexity of factors influencing energy prices mean it is increasingly difficult to provide confident price predictions, from the geo-politics of the Middle East, Opec and Russia to Brexit and Trump, the expansion of renewable energy and supply- and demand-side technological developments such as fracking, battery storage and energy efficiency.

While oil and gas prices may experience see relatively stable 2017, UK electricity prices are all but certain to see an increase:

  • The wholesale electricity element now accounts for less than 50% of your bill, so even if the commodity markets fall prices could still increase on the back of rising non-energy charges
  • These non-energy costs – transportation, distribution, government charges, taxes etc – will increase over the next few years, resulting in higher costs for all

What to do?

  • Understand your risk: what is the impact on your business if prices increase by 5, 10, 15% a year over the next few years?
  • Manage that risk: test the market early, don’t wait until near your renewal time when you could be hit by a price spike – contract when the market is in your favour
  • Focus on efficiency: cut costs and reduce exposure to volatile markets by using less
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Comments
  1. […] energy costs, particularly electricity, are on the up with further uncertainty likely, it remains a good time to be reviewing all contracts due for renewal in 2017 (if not […]

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