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What Affects Business Gas Prices?

Business owners are frequently irritated by changes in energy prices. Increases in gas costs translate
into higher expenses, while decreases in those costs lead to more volatility in money management.
That’s why it’s wise to become a little more knowledgeable about the factors that influence and
contribute to changes in gas prices. The price of wholesale gas is influenced by a wide range of
factors, and knowing which ones are at play makes it much simpler to forecast when prices will
change. Managing a business requires managing sometimes scarce funds. When it comes to your gas
bill, it’s easier to save money the more you know about the prices you pay.

Supply and demand

The classic idea of supply and demand is, as one might anticipate, the first factor influencing gas
prices. The most fundamental connection between price and commodity is this one. Huge volumes
of gas are purchased, sold, and then transported. The amount of that supply available will have an
impact on gas prices. In the United Kingdom, demand and price both increase when there is a
shortage of gas. Conversely, lower gas prices can result from a surplus of gas supply in the UK
compared to demand, which is excellent news for companies.

Importing gas

The days of Britain being able to produce all of its own gas are long gone. The nation now has to rely
on importing gas due to the depletion of North Sea reserves. This implies that we are in competition
with other nations, and that gas prices will inevitably rise in the event of a shortage. Routine
maintenance on gas fields or pipelines, which is easily predictable and planned well in advance, may
occasionally result in a shortage of gas. Demand will always exceed supply during unscheduled
disruptions, which will cause prices to rise.

Gas Storage

The largest gas storage facility in the UK was shut down in 2017. This resulted in the nation’s gas
reserves decreasing from fifteen days to four or five days. This had a significant effect on gas prices,
particularly during the exceptionally cold winter that the UK had in 2018. The price of gas shot up to
its highest level in over ten years following a warning of a gas shortage. A combination of gas
pipelines and LNG tankers is more than sufficient, according to the Department for Business, Energy
and Industrial Strategy, despite the fact that industry experts have strongly urged the current
government to look more closely at its gas storage plans.

The Pound

Gas prices fluctuate with currency values like all internationally traded commodities. Since we
import a lot of gas from Europe, your gas bill will often reflect the strength of the pound. Pound
strength has plummeted in recent years. That’s raised gas prices, which affects your bills. If politics
change, the GBP will too. That may or may not affect gas prices.

Wind Power

More offshore wind energy is generated in the UK than anywhere else. Over 40% of global wind
energy capacity is in Britain. This will grow as the government plans to generate at least a third of its
electricity from wind power by 2030. Of course, less windy days generate less energy. Natural gas
must be diverted to power stations, raising prices. As we rely more on wind energy, any long-term
drop in wind power could drive up gas prices.

Heatwaves, Cold Snaps

Another supply-and-demand factor. Hotter weather makes us use less gas, which makes sense. Gas
prices will fall due to low demand. In winter, we use more gas, which raises demand and prices.
Wholesale gas is bought in advance, so weather forecasts affect prices. Unexpected weather events
can cause serious disruption, which can affect gas prices.


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