“Grim” world economy should give energy buyers pause for thought

The Advice The deteriorating “grim” world economic outlook should outweigh ‘kick-start’ monetary policy actions, give energy buyers pause for thought when looking at price contracts, according to a monthly price […]

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By Vicky Ellis

The Advice

The deteriorating “grim” world economic outlook should outweigh ‘kick-start’ monetary policy actions, give energy buyers pause for thought when looking at price contracts, according to a monthly price risk prediction from BuyEnergyOnline, the online energy market for businesses buying electricity and gas.

 

Globe watch: need-to-know background

Europe’s economy shrank 0.2% in the second quarter of 2012, notes BuyEnergyOnline, following zero growth in the first three months, with economic indicators in July and August suggesting Europe should fall into a double-dip recession this quarter.

In the States, the looming ‘fiscal cliff’ – which will automatically increase taxes and cut government spending in the new year to the tune of 4% GDP – is re-emerging as a potential flash point, according to the price risk prediction. The cut off will happen unless new financing is negotiated with the Senate.

Asian superpower China’s growth is also slowing down with flashing “danger signs” from some economic indicators including manufacturing and export.

What happened with energy prices?

Overall, markets had an “exuberant” couple of weeks following ECB President Draghi’s ‘whatever it takes’ comments at end of July, but turned cautious ahead of further monetary policy announcements over the next couple of weeks.

Nuclear-related Iran-Israel tensions hit UK energy prices during August, said Derek Myers, managing director of BuyEnergyOnline: “UK gas and electricity prices have been tracking oil price volatility associated with concerns about Israel striking out at Iran nuclear power research centres before they are relocated safely in deep underground bunkers.”

Mr Myers added: “Overall, gas prices were up 4.3% to 2.18p/kWh and electricity prices rose 5.3% to 5.55p/kWh. Oil prices increased 8.4% to $114/barrel, coal prices bucked the trend falling 3% to $92/tonne and carbon permits rose 16% to €8.04/tonne.”

The Prediction

Gas and electricity prices are likely to remain “bearish” because of the global slowdown and concerns about the US ‘fiscal cliff’. With possible monetary policy actions taken into account in the financial and energy markets this month, any postponement of those may cause changes to prices, advises BuyEnergyOnline.

Mr Myers added: “Wait as long as possible to lock away fixed prices for no longer than 12 months. Within this grim economic environment we would recommend using flexible purchase contracts to ride the market lower by buying on a month-ahead or day-ahead spot basis.”

Visit www.buyenergyonline.com to view the full Report or contact Mike Chan on [email protected] or 07769972189 for any questions.