Gas Prices in the UK : Markets and Insecurity of Supply

Provides insights into the reasons for dramatic increases in UK gas prices since 2003, contending that replacement of administered arrangements by market relationships and competition have made UK gas prices far more sensitive to insecurities of supply, both small-scale and large-scale, leading to the formation of an industry ownership structure.

Set in the context of the dramatic increases in the price of gas which UK gas consumers have had to endure since 2003, this book explores how it is that UK gas industry liberalisation, which once promised ever lower prices, is now being undercut by the much less liberal continental European marketplace. To do so it uses a wealth of data to build up an analytical picture of the UK gas industry, segment by segment, from well-head to burner-tip. In so doing the respective roles played in gas price formation by the wholesale cost of gas, its transportation costs and the cost of supply by marketing companies are revealed for both industrial and domestic consumers. The central contention is that the replacement of administered arrangements by market relationships and competition have made UK gas prices far more sensitive to insecurities of supply, both small-scale and large-scale strategic. In consequence, companies operating along the gas chain have had to take up defensive positions to manage these new risks, relying particularly on either upstream production or captive domestic consumers to shield them. Nor is it the case that more competition, with more switching by consumers, can provide a remedy. Instead, the UK government will have to consider re-introducing price control regulation for domestic consumers while also requiring upstream companies to protect consumers from volatility by holding more gas in storage. As well as providing new insights into causes of relatively high gas prices in the UK, the book also provides a long-overdue source of reference about the UK gas industry: about its infrastructure, companies, marketplaces, contracts and regulation.