Oil price hike pushes up wholesale energy costsLast updated on 11/05/2016
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.