Thursday, March 17, 2005

Energy Costs

Energy use and costs have been at the front of my mind for the past few weeks, as I guess they have large parts of the chemicals industry, and the European Commission, which I think deserves a small round of applause.

There have been major problems for energy intensive users in the UK over the winter with inefficient gas futures market and spot markets leading to considerable spikes in the price of Natural Gas, for example.

The UK market for natural gas is pretty well free, unlike those on the nearby continent of Europe to which it is connected by a pipeline. (Incidentally this the capacity of this is greater from the UK to the continent than it is from the continent to the UK). State control in continental gas markets means that gas suppliers there can afford to treat the UK as a gas reservoir. This combination of an illiquid futures market in natural gas in the UK and state controlled gas companies in most of the rest of Europe is not satisfactory.

Yesterday the commission said it was sending a 'reasoned opinion' -- short hand for a final warning -- to Germany, Belgium, Estonia, Ireland, Latvia, Lithuania, Sweden, Greece, Spain and Luxembourg for failing to make either of the directives of on internal gas supply or electricity markets into their national law. This follows an initial yellow card in October and could see the countries making their excuses before the European court.

There can be no reason not to transpose the directive into law and then enforce it.

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