Heating plays an important role in UK businesses but can be very expensive. With constantly fluctuating gas prices, it can be difficult to know how to get the best deal for your business.
It can also be difficult to understand why the prices are changing so quickly and so drastically.
Keep reading to find out what influences the gas price and how to find the best option for your business.
HOW ARE GAS PRICES CALCULATED?
There are a number of different things that play a role in the overall price of gas – the price that you pay is not just for the gas itself, but covers things such as levies and transport.
WHOLESALE PRICE
The wholesale price of gas fluctuates throughout the year. It is influenced by many different factors, which will be detailed later in the article. The main influences are the time of year and the oil and LNG price.
TRANSPORT
All gas needs to be transportred, so any costs pertaining to transportation will be incorporated into the overall price of your gas.
ENVIRONMENTAL LEVIES
There are various environmental levies that are associated with gas, such as the Climate Change Levy.
TAX
Gas incurs a number of different taxes, such as the Petroleum Revenue Tax and Ring Fence Corporation Tax.
5 FACTORS INFLUENCING THE WHOLESALE GAS PRICE
The wholesale price fluctuates throughout the year and can sometimes have a surprisingly steep increase, which can be scary for businesses and domestic households alike. Let’s take a look at what influences this wholesale price.
OIL AND LNG PRICES
The demand for liquified natural gas (LNG) has increased dramatically in the last several years, specifically in the Asian market. This has a direct effect on the supply and therefore affects the price.
The increased demand can cause bidding wars between countries, which can push the price up drastically. Natural disasters, such as Hurricane Ida in the USA, also influence the price as they have an impact on transportation and availability of the product, which further influences the demand.
TIME OF YEAR
There is an increase in demand for gas at different times of the year. In the colder months, LPG is needed for heating, and there is a significantly higher demand. This pushes up the price.
Gas is cheaper in the summer as it is not in as high demand.
CURRENCY FLUCTUATIONS
Fluctuations in the strength of various currencies play a role in the price of gas. When the pound is doing well against the euro, other countries will prefer to purchase from Europe. This has a knock-on effect in the UK, lowering the gas prices locally due to decreased demand.
SUPPLY ISSUES
There are many aspects that influence the supply of gas internationally. It is a finite resource coming from fossil fuels, which is one thing to bear in mind. If a major supplier of gas enters into war, the likelihood of the gas supply being negatively impacted is high. This has most recently been seen with the Russia/Ukraine conflict.
Another influence on supply is natural disasters. Hurricanes, tornadoes, volcanic eruptions, and earthquakes all can negatively impact the mining and transporting of natural gas internationally.
ALTERNATIVE ENERGY
The increasing use of alternative energy sources could have a positive effect on gas prices in the future. However, at the moment, due to the unreliability of alternative energy options, the opposite tends to happen.
If the alternative energy resource does not perform as well as it did the previous year, the demand for gas will increase, pushing up the price.
WAYS TO REDUCE YOUR GAS CONSUMPTION
You can reduce your gas consumption by reducing the temperature of your heating by a degree or two and by installing automatic doors – they’ll help reduce temperature fluctuations in the building.
You can also install a smart gas meter, which will allow you to take accurate daily readings of how much gas you are using, and analyze if the changes you’re making are having an effect.
FINAL THOUGHTS
With so many different factors at play, it really is difficult to fully comprehend the pricing of gas and make the best choices for your business needs.
If you’re looking to reduce your spending on gas in your business, contacting a broker could be a good move. You can discuss finding better gas prices for business with utility bidder – they can give you comparisons and get you the best deal for your specific needs.
They can also assist you with finding a reliable supplier of a green alternative if you want to make your business or home more sustainable and environmentally friendly.
