Price of gas in Europe is expected to rise by up to 17 percent, reaching new heights in next year because of rise in oil prices, according to a warning issued by Gazprom. The state-owned Russian company said on Tuesday that gas prices in Western Europe will rise to $300 -$350 per thousand cubic metres.
The steep rise in gas prices follows the government of Turkmenistan’s increase in price for its gas supply. The price of gas from Turkmenistan is linked by supply contracts to the cost of oil products such as heating oil.
According to a price formula based on market principles, Gazprom will pay $130 per thousand cubic metres in the first half of next year and $150 per thousand cubic metres in the second half, up from $100 this year. From January 2009, the company will move to a new pricing formula.
Current gas prices in continental Europe is already at a record level of $300 per thousand cm. The oil-linked contract formula, which is blamed for the rise in gas prices in Europe, is due to lack of competition in continental European gas markets, according to Patrick Heren of Heren Energy.
Critics say that there is no shortage of gas in Europe and gas prices are not linked with its demand and supply, but the lack of a competitive market had made the suppliers dictate prices according to their own terms.
Image: Telegraph
Source: Financial Times
