UK gas prices 'pushed up by oil'

Higher oil prices have fed through to the gas market

Gas prices in the UK are likely to remain high for at least the next three years, a report has predicted.

The study blamed the knock-on effect of the current record high oil prices and supply shortages, which planned new import pipelines should ease.

Commissioned by trade body UK Offshore Operators Association (UKOOA), it found no evidence that suppliers were restricting production to lift prices.

But a consumer watchdog said the report just sought to justify high prices.

New supplies

"The UK market for gas is very heavily tied to oil prices," Mike Tholen, the UKOOA's economic and commercial director, told BBC Radio 4's Today programme.

The price rises have been passed on to consumers

"We have got new pipelines coming both from the Netherlands and Norway and as those new gas supplies come in, they are bound to change the market a bit.

"But in the intervening time... while oil prices are high, we are going to continue to face pressures upwards on gas prices."

Mr Tholen welcomed the report's other conclusion that no suppliers were holding gas back to force up prices.

"The report has seen nothing to that effect and certainly (regulator) Ofgem so far has found no evidence to indicate that that is the case," he said.

The domestic market for gas remained "very competitive" and consumers could find lower prices by shopping around, added Mr Tholen.

The UKOOA represents 30 UK oil and gas producers.

Gas and electricity watchdog Energywatch has however dismissed the UKOOA report, arguing that it seeks to justify high consumer prices.

Its chief executive Allan Asher said: "It runs counter to Ofgem's position arrived at after an exhaustive year-long probe into gas prices, that liberalisation will break, or at least dilute, the link between the price of oil and gas, and allow the price of gas to fall."

Consumers pay

At the start of the month, energy regulator Ofgem also blamed high oil prices and problems with the UK's supply of gas for the steep rise in wholesale gas prices.

However, it added that when gas demand recently climbed, a number of UK suppliers held back supplies because of "technical clauses" in the supply contracts.

The regulator is now speaking to a number of gas suppliers to find out why this happened.

This year's increases in gas prices have been passed on to the consumer, with British Gas having raised charges twice since January.

"Prices have dropped through the 1990s, but as supply and demand have come closer to balance in the UK, we have seen prices gradually rise," added Mr Tholen.