Why Gas Prices Fluctuate and How To Get the Best Deal

September 20, 2021 by Admin

In 2020, we used 72.5 billion cubic meters of gas.

It’s an extremely important natural resource that helps to heat our business and keep the lights on… but fluctuating prices can make it hard for businesses to manage their budgets and energy spending.

Most of us will have experienced the ‘bill’ shock that comes from receiving a bill that’s much higher than expected… and increasing gas prices are probably responsible for more nasty surprises than most. So why do gas prices fluctuate so much? And how can you protect your business from increasing prices?

At Tariff.com, we want to empower your business to get the most from its business utilities. That’s why we’ve created this Tariff.com guide to answer all the questions you have about gas.

 

What Is Gas Used For?

As a fossil fuel, natural gas releases a considerable amount of energy when it’s burnt. This energy is used to power numerous aspects of daily life including:

Electricity

With the UK increasingly moving away from coal consumption, natural gas now generates 37% of the UK’s electricity. Burning natural gas creates heat, which is then used to generate steam and power turbines. This in turn creates electricity.

Heating

Many buildings in the UK have gas-powered central heating to heat their homes and their water. Also known as a ‘wet system’, gas central heating uses a gas-fired boiler to heat water, which is then distributed to your taps and radiators via pipes.

Cooking

Whilst gas ovens are declining in popularity, many households and businesses still rely on their gas-powered oven and hobs to cook food. Gas-power is still a favourite in the restaurant kitchen, with chefs citing better temperature control, quicker heating, and easier maintenance as their main reasons for sticking with gas.

Air Conditioning

Whilst we often think of gas as something that heats, it’s also used to help both homes and businesses stay cool. Whether powered directly with gas or indirectly by electricity generated from gas, air conditioners can take up a lot of energy, especially in countries with hot climates.

Why Do Gas Prices Fluctuate?

Whilst the energy market as a whole is no stranger to price fluctuations, the gas market can often seem particularly volatile. The wholesale price of gas does fluctuate up and down, putting pressure on suppliers to cover their costs and ultimately impacting your business energy bills.

There are many factors that can affect the wholesale price of natural gas. Recognising these market influences can help you understand the price changes better and empower your business to get the most from your supplier and energy spending. Here are some of the top factors that can influence the market.

Supply and Demand

Supply and demand is an economic model in which the price of goods or services is determined by the market. In this case, gas is the commodity being bought and sold. When the supply of gas in the UK outweighs the demand, prices can fall. Conversely, if the supply of gas drops as demand increases, prices will go up.

Weather Conditions

Changes in weather conditions both in the UK and globally can impact the demand for gas, causing prices to fluctuate. In the UK, consumption and demand for gas is often higher in the winter; more people are using their central heating to warm their homes and businesses. This can see the price of gas increase, especially if there’s a strain on global gas supplies.

Wind Power

As the UK increasingly relies on wind power to generate electricity, an increase or drop in wind-generated electricity can also impact gas prices. Prolonged periods of windy weather mean the UK will have increased electricity supplies, reducing the demand for gas-generated electricity. Conversely, an absence of wind could reduce the country’s supply of electricity, pushing up the demand and price for gas consumption.

Gas Imports

Whilst the UK could once meet the demand for gas with its own reserves in the North Sea, the supply is now dwindling and we have to now import gas to ensure a continued supply. Unfortunately, this means we have to buy gas from other countries and are competing on an international market for supplies. If there’s a global shortage, we’ll find ourselves paying more for gas than we’re used to.

Gas Storage

Back in 2017, the UK was able to store around 15-days’ worth of gas in storage sites across the country. Sadly, the UK’s biggest gas storage site was decommissioned, meaning we now only have four or five days’ worth of gas reserves. This lack of stored gas puts a strain on supplies, pushing prices up when demand is high e.g. in cold winters when more gas is used.

 

How Can I Get the Best Deal on Gas?

Now you know why gas prices fluctuate so much, you’re no doubt wondering how you can get the best deal for your business. One of the easiest ways to save money on your gas bills is to switch suppliers. If you’ve been with the same supplier for a few years, there’s a high chance that you’re overpaying for your energy bills.

This is where Tariff.com can help your business. Our energy consultants will use their knowledge of the gas market, as well as advanced market analysis tools to find the best deals on your business gas. We’ll analyse your current energy bills to determine if you’re overpaying and by how much. Our team will then search the market for the optimal gas tariff for your company, helping you to reach your savings and energy goals.

What is Green Gas?

Also known as “biogas” or “biomethane”, Green gas is a greener alternative to traditional gas. Green Gas is produced through anaerobic digestion, a process that releases gas as bacteria breaks down food and farm waste. This gas is then captured, purified into biomethane and offered to homes and businesses as a viable alternative to regular gas.

Unlike fossil fuels, Green Gas represents a more sustainable and often carbon-neutral alternative. This means that no extra carbon will be added to the atmosphere; it only releases what was absorbed when the organic matter first grew. It can be used in exactly the same way as traditional gas, helping us to heat our homes and cook our food- without environmental damage.

 

Should I Switch to a Green Gas Tariff?

With more and more businesses looking to do their bit for the planet, green gas tariffs are becoming an increasingly popular option for businesses. With the UK now working towards net-zero emissions by 2050, we all need to do our bit to reduce our carbon emissions and invest in green energy.

As a fossil fuel, there’s also a finite amount of natural gas in the world. Based on current consumption, we have just over 52 years of natural gas left. It’s clear that an alternative is needed.

Could that alternative be green gas?

In the main, green gas is still a growing industry. You’ll most likely find that green gas tariffs are more expensive and for many businesses, this can be a deal-breaker. Some suppliers do offer a ‘blended’ option, mixing natural and green gas in various percentages to bring down the price.

If you are interested in exploring switching to green gas, our team will get to know your business, its energy budget and savings goals to ensure it makes financial sense for you and your company.