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UK gas prices and problems from history Free essay! Download now

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UK gas prices and problems from history

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Downloads to date: N/A | Words: 2773 | Submitted: 22-Apr-2011
Spelling accuracy: 96.5% | Number of pages: 12 | Filetype: Word .doc


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UK gas prices and problems from history essay previewUK gas prices and problems from history essay previewUK gas prices and problems from history essay preview

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UK natural gas prices

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The aim of this assignment is to investigate how the ‘dwindling supplies’ of gas have affected prices in the UK over the last two years. To supplement the shortage of gas the UK is experiencing and the high prices being charged, a new underwater water pipeline from Norway to the UK grid is going to be built which will provide a fifth of the UK’s peak winter fuel demand over the next four decades. With an increase in supply when the pipeline is complete, the price of gas will change. The reasons for such changes are due to the elasticity of the product, which economists believe income elasticity of demand for gas is 0.6 and price elasticity of demand for gas is 0.2. In order to understand how changes in supply and income affect demand, examples of price changes in gas will be used and the consequences of such actions clarified.

Gas is one of the most important natural resources to be discovered, it has a limited supply making it one of the most valuable resources to mankind. It is becoming apparent that gas will one day run out therefore causing governments, producers, suppliers and consumers to rethink about its use wisely or pay the price. Gas consumption has grown by a staggering 66% since 1992 mainly due to the large increase of gas used to generate electricity (30% of annual gas consumption) Ofgem fact sheet (2003). The UK is becoming very much reliant on gas imports as the UK is using up remaining gas reserves rapidly. By 2010 the UK is expected to be importing approximately 50% of its gas www.news.bbc.co.uk/1/low/business/3835441.stm. Imports must be increased from Norway, Russia and the Middle East to ensure supply meets demand in the UK. Russia, the Caspian and Nigeria jointly account for 79% of the worlds proven reserves of natural gas www.moneyweek.com/file/16481/gas-bills-are-rising-but-there’s-light-at-the-end-of-the-tunnel.html. However, there is much speculation regarding Russia owning such a large amount of gas as it increases the UK’s exposure to geo-political risks should they import gas from Russia. Gazprom, the Russian state owned gas Monopoly Company had a major dispute over gas prices in March 2005 with transition of gas to the Ukraine and Europe. Having failed to reach an agreement on gas prices, Gazprom cut off all gas exports to the Ukraine consequently affecting supplies throughout Europe. These drops in supplies have in effect sent prices’ soaring as demand was exceeding supply. Although gas was restored in January 2006 all European countries have still experienced an immediate drop in supply.

Today’s problems in the UK gas market can be traced back to the privatisation of industries ...

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