ZEW Energy Market Barometer – Experts Forecast Significant Increase in Gas Prices

Energy experts assume that natural gas will become considerably more expensive over the next six months, whereas coal and crude oil prices are expected to remain largely unchanged in this period of time. The six-month forecasts for rising and stagnating electricity prices are about balanced. On a two-year horizon, however, all energy sources are expected to become more expensive.

These are the findings of the current ZEW Energy Market Barometer conducted by the Centre for European Economic Research (ZEW) in Mannheim. The biannual survey is conducted among more than 200 experts from energy supply companies, energy-trading companies, and energy service providers, who are asked to give their expectations concerning short and medium-term developments on national and international energy markets.

Among the expectations regarding the price development of fossil fuels, natural gas price expectations display the highest growth. More than 72 per cent of the experts interviewed for the ZEW Energy Market Barometer assume that in the coming six months, gas prices will grow. About 24 per cent forecast stagnating and merely four per cent falling gas prices. On a two-year horizon, approximately 63 per cent of the participants expect gas prices to increase. More than 24 per cent estimate that the prices will largely remain on the current level and almost 13 per cent forecast a decline in gas prices.

According to most experts, prices for coal, the other fossil energy source that is crucial for generating electricity and heat, will barely change in the short run. About 31 per cent expect coal price increases in the next six months, while 63 per cent forecast stagnation and eight per cent a decline.

Among all energy sources mentioned in the ZEW survey, short-term and long-term expectations regarding crude oil showed the greatest gap. Whereas, on a six-month horizon, the experts forecast stagnating prices, they assume that prices will increase over the next two years. For the coming six months, 34 per cent expect rising, 49 per cent stagnating, and almost 18 per cent decreasing oil prices. With regard to the next two years, on the other hand, a vast majority of 59 per cent forecasts growing, 23 per cent stagnating and 18 per cent falling oil prices. The differing estimations possibly reflect the opinion that the oil price might drop these days due to high investments in extraction and refining capacities. However, important determinants of the oil price are not likely to change substantially over the medium-to-long term. According to the projections of the International Energy Agency, the demands of the USA and particularly China will further increase.

Almost half of the experts (48 per cent) expect mounting electricity prices over the coming six months. Approximately 45 per cent estimate that electricity prices will stagnate and only six per cent believe they will decrease by mid-year. On a two-year horizon, almost two thirds of the experts (64 per cent) expect growing, 24 per cent constant and 12 per cent even shrinking electricity prices. Put together, the balance (disparity between positive and negative expectations) indicates a tendency towards rising prices, but for both short and medium-term expectations, this is still the lowest balance recorded since August 2003 – the founding year of the ZEW Energy Market Barometer.

Contact

Dr. Ulf Moslener, E-Mail: moslener@zew.de