Oil Prices on the Rise Again: Time to Consider Renewing Gas and Electricity Contracts

Last month we reported that energy prices generally would be on the rise again, courtesy of the agreement within OPEC countries to restrict oil production. 

In brief, OPEC members and some other big oil producing nations have agreed to cut production. Their intent is to reduce the current global supply gut, in order to drive oil prices up.

So far it’s having the desired effect. Wholesale oil prices rose 13% overall during December 2016, and we can expect this rise to continue. Oil prices have a knock-on effect on the entire energy market and gas and electricity prices rose as well in December, although not by so much.

So what? This is a good thing for some parts of the economy. But it’s obviously not helpful for large estates with high energy expenditure.

For those on oil, it will just add to the impetus to do something this year about getting off oil.

For those on gas and electricity contracts, we’re recommending that you consider renewing the contracts early this year. Even if your current contracts are not due for renewal until late 2017 or sometime in 2018, they can be renewed well in advance. Gauging the market is always going to be tricky, but on balance there is a higher risk that prices will rise than fall over the year - so it’s worth considering testing the market now rather than waiting. We expect the market to be volatile during January and February, but settling down by March: so March would be a good month to target for going to market.

Small hint: with our energy contract reverse auction approach it’s possible to test the market without having to commit to a new contract if the auction does not achieve as good a price as expected.