Mr Laidlaw expressed his concerns over the existing price regime, by saying that the UK has to import gas from European energy suppliers who are sourcing it under contracts pegged directly with the cost of oil. Increasing oil prices have also inflated wholesale gas prices, with the existing time-lag mechanisms in Europe affecting prices in winter.
Centrica’s CEO noted that the UK is witnessing major price volatility. In 2007, wholesale gas prices decreased by as much as GBP0.13 per therm and subsequently increased by GBO0.60 per therm, all in a matter of months.
Mr Laidlaw observed that 2008 gas prices are 45% higher when compared to 2007 and given such market conditions, gas flows into the UK have not really taken off, as should have been the case.
British wholesale gas prices are reportedly being negatively impacted by the lack of liberalization in the European markets, with EU members having access to gas volumes in the UK but failing to deliver the same to the UK when pricing gaps factor in.
Mr Laidlaw added that the primary challenge for Centrica-owned British Gas and its UK-based competitors will be to minimize the impact of price volatility and ensure profitable margins to secure the supply of energy to their customers.
