Berlin, 9 June 2008
In the opinion of the German Federation of Energy and Water Industries (BDEW), it is speculative and unrealistic to predict that residential gas prices will rise by about 40 % in the autumn. The actual development of prices depends largely on oil price trends in the coming months and on the structure of individual suppliers in the respective regions, BDEW stated. In general, demand for energy was growing worldwide, thus causing prices on the world market to go up. Germany and indigenous energy suppliers could not decouple themselves from this development.
"Oil price indexing, which is often criticised, is a tool in line with market needs. It forms part of long-term supply contracts signed by German companies with companies exporting gas to Germany. These contracts cannot just be terminated unilaterally," said BDEW President Brinker. "Long-term contracts for supplying gas to Germany are highly important for supply security. With the aid of such contracts companies ensure that the few producers on the fiercely contested global energy market do not decide to sign the contracts with others. Furthermore, oil price indexing under long-term supply contracts provides protection against unilateral pricing by gas-producing countries," Mr. Brinker added.
Moreover, oil price indexing was not a one-way street going upwards. Last year many utilities had lowered their prices after the oil price had gone down.
Even in countries without such indexing, like the UK, the USA or Japan, the influence of global oil price movements on gas price developments was visible. "There, too, the gas price developments follows in the long run the price development of oil as competing fuel - with far greater, more sudden fluctuations than in Germany," said Mr. Brinker. "Oil and gas compete with each other on sales markets, and thus the gas price trend is geared on a long-term basis towards the price development of oil as rival energy source," the BDEW President explained.