Oil price hike pushes up wholesale energy costs

Oil price hike pushes up wholesale energy costs

An increase in
the price of oil during April lifted the firmus energy Index to 91. Month on
month the cost of a barrel rose 17 per cent. Oil is more expensive now than at any
time since the start of January. However, the overall cost of energy remains
well below the average level of the past five years despite this hike in the
price of oil.

 

Commenting on
the April firmus energy Index, John French, firmus energy’s director of regulation
and pricing explains: “Oil prices were sent higher by fighting in Yemen. While
not an important producer, the state occupies a strategic position close to the
sea route between the Indian Ocean and the Mediterranean. Another factor was
the decision by a number of oil producing countries to cut output. These so
called shut-ins took almost three and a half million barrels a day out of
production.

 

“Fears that
the cost of oil could continue to soar may be unjustified according to several commentators.
Investment in both shale oil and conventional oil production will keep a lid on
prices. While this is not a universal view, the Economist magazine reckons that,
for the present, oil prices will stay around or below current levels.

 

“As the main
energy source within the local economy, oil plays a key role in determining the
level of the firmus energy index. Recent volatility in the index reflects
variability in the price of oil rather than other fuels whose costs barely
moved in April,” he added.

 

In April the
price of gas fell by one per cent ending marginally below the level reached in
the same month in 2014 and well under rates achieved in previous years. This
softening in prices occurred as imports of LNG from Asia counteracted the
impact of major reductions in the supply of gas from Norway and the
Netherlands.

 

Erratic production
from Irish wind turbines forced more thermal plant onto the grid. That pushed
up wholesale electricity prices by around one pound sixty a megawatt hour or by
less than a fifth of a penny per kilowatt hour. This small rise in prices fed
through directly into modestly higher profits for fossil fuelled power
stations.

 

Coal prices
stayed subdued despite interruptions to key supply chains in both Russia and
Colombia. Global demand for coal remains soft as China curbs its appetite for
imports partly over continuing concerns for its impact on the environment.

 

 


Last updated on 11/05/2016

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