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Factors That Affect Business Gas Prices

The UK energy market is volatile and affected by many factors. Both residential and business consumers find that this volatility can either be an advantage or a disadvantage. When wholesale prices go up, consumers have to bear the burden of paying more on their energy bills. On the other hand, lower market prices mean that the reduction may also be passed down to the end users.

There are short-term and long-terms factors that affect business gas prices in the UK. As a business owner, being aware of what causes the rise and fall of energy prices is crucial in determining the best time to start looking for a new supplier using utility comparison sites like https://www.utilitybidder.co.uk/business-gas. Some of these are highlighted below.

Short-term factors

Short-term factors are unexpected events that impact how the energy market behaves but are likely to last only for a small amount of time.

  • Gas storage. Energy storage facilities around the UK are essential to ensuring that there is sufficient supply for the country’s energy needs. When something happens to these facilities, like the temporary closure of Centrica in 2017, the demand for energy will be more than the supply which will cause an increase in wholesale prices.

  • Climate. Warmer weather means there is less demand for gas and heating. This is excellent news for business consumers because gas prices usually go down in summer.

  • Renewable energy generation. Wind and solar energy generation can also impact energy prices around the country. When the climate is optimal for generating energy from the sun and wind, the energy market is also affected. It is a positive impact for consumers that use renewable energy but may upset fossil fuel suppliers.

  • Availability of gas. Gas is traded around the world in vast quantities. The law of supply and demand states that if the demand is higher than the supply, prices will be higher. Since the UK is an importer of gas, the market prices change by the hour. If supplies are affected by pipeline repairs and maintenance, it will cause a sudden leap in market prices as well.

Although not a significant factor, the liquefied natural gas supply may also impact energy prices in the region.

Long-term factors

These are concerns that are expected to cause a more permanent effect on gas and energy prices.

  • The value of the country’s currency against the Euro will impact the buying behaviour of wholesale energy traders.One of the primary factors that influence the volatility of energy prices is the price of crude oil. The higher the market price, the higher the energy prices as well.
  • Closure of coal power stations. Closing down coal power plants is a necessary step to environmental protection. However, these closures will put a dent in the overall supply of energy around the country.

  • Government regulations. Legislation impacting the supply, delivery, and energy trade around the world will also affect countries like the UK, which depends on gas from other European countries.

The volatility of the energy market is expected because these factors are uncontrollable. What business consumers need to do is remain vigilant to take advantage of the times when rates are at their lowest.

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