Photo of John Hemming

John Hemming (Birmingham, Yardley, Liberal Democrat)

To ask the Secretary of State for Trade and Industry what estimate he has made of the likely variability of wholesale gas prices during winter 2005–06.

Photo of Malcolm Wicks

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

Variability, or volatility, is a normal part of the working of a well-functioning commodity market. Current UK wholesale spot gas prices are determined by the price of oil and the day-to-day balance between demand and supply in the UK gas market.

When the market is tight small changes in demand and supply will have a bigger impact on price volatility than if the market were over-supplied. The balance of demand and supply, and thus the volatility of prices, will depend on many external factors, including the weather and the availability of storage facilities or import infrastructure on a day-to-day basis. In view of the unpredictability of many of these factors it is not possible to make accurate estimates of future price volatility.

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