Gas prices in October 2008
Destatis, 18 November 2008
Increasing gas prices as a result of high oil prices
Following the increasing prices of crude oil in the world market, the consumer prices of heating oil and motor fuels climbed dramatically in spring and summer of 2008. In July 2008, they reached an all-time high. While oil prices began to decline again in August, marked increases have now become apparent in gas prices. This observation has not come as a surprise because, like in previous years, gas prices follow more or less the trends in oil prices with a delay of six to nine months.
This is due to what is called the gas-oil price link which is part of the delivery contracts concluded between mostly foreign suppliers of natural gas and importers. The gas price is linked to the trends in the prices of the major competitive energies like, above all, liquid fuel. In many cases, the delivery contracts are based on the reference price indices compiled in the context of the German producer price statistics. An indicator largely used is the index of producer prices of industrial products for liquid fuel.
The way in which the gas price is linked to the oil price becomes clear when comparing the trends in the producer prices of liquid fuel with the import prices of natural gas. The latest wave of increases in the producer prices of liquid fuel began in March 2007, while the gas import prices started to climb considerably in October 2007, i.e. more than half a year later.
What trends have been observed in the consumer prices of gas?
At the consumer level, gas prices fluctuate much less considerably than at the import or producer level. This is so because, in addition to the costs of buying gas, the local utility gas prices include a number of other cost elements such as the natural gas tax or the costs of channelling gas through networks. These cost elements lessen the impact the development of import prices has on consumer prices (Table: Import prices of natural gas and gas consumer prices).
Currently, however, the consumer prices of gas are fluctuating, too. In October 2008, they were 21.4% higher than in the same month a year earlier. Hence the increase was as strong as more than seven years ago. At the same time, a particularly strong rise was observed on the preceding month. Gas prices climbed 6.7% in October on September 2008.
Where does the gas come from which is consumed in Germany?
The natural gas used in Germany is largely imported and, to a smaller extent, produced inside the country. The main countries of origin are Russia and Norway. Through a multi-level supply chain, the natural gas is supplied to the end users. In the beginning, the imported or domestic gas is fed into the networks of the remote and regional gas corporations, which are also referred to as distributors. The latter sell the natural gas to the local gas suppliers (often municipal energy suppliers) which distribute the natural gas to the different groups of end users through their own local networks. In addition to this typical supply chain, a wide range of other supply relations exist, for instance, directly between natural gas importers and industrial end users.
How is the gas consumer price index calculated?
The consumer price index for gas consists of three subindices for different types of households. The types of households are characterised by a monthly gas consumption of 1,000 kWh, 1,600 kWh and 2,300 kWh, respectively. The subindices comprise a price per kWh component, which depends on the level of consumption, and a basic charge. Apart from the natural gas prices regarding these types of households, the calculation of the gas consumer price index considers, to a small extent, a subindex for liquid gas. The total gas price index is a weighted average of the subindices. The survey of gas prices covers a wide range of regions.
In the context of the German price statistics, price indices for natural gas are determined at all supply levels. In detail, import price, producer price and consumer price indices are calculated. Our publication entitled Data on energy price trends provides an overview of the price trends for different types of energy at different economic and marketing levels.
Author:
Nadin Sewald - Federal Statistical Office
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