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Home / Information and statistics / Energy prices / March 2003

Quarterly Energy Prices - March 2003

Contents

	List of Tables
	Tables in previous publications and update timetable *
	Section 1 ­ Introduction *
	Section 2 ­ Domestic Prices *
		2.1 Retail price of fuels for the domestic sector *
		2.2 Domestic electricity bills *
		2.3 Domestic gas bills *
		2.4 Domestic electricity competition *
		2.5 Domestic gas competition *
		2.6 Expenditure on energy in the domestic sector*
	Section 3 - Industrial Prices *
		3.1 Energy prices in the manufacturing sector *
		3.2 Average prices of fuels purchased by the major UK power producers and of gas at UK delivery points
		3.3 Fuel price indices for the industrial sector *
	Section 4 ­ Oil and Petroleum Product Prices *
		4.1 Typical retail prices of petroleum products *
		4.2 Crude oil prices *
	Section 5 ­ International Comparisons *
		5.1 Premium unleaded petrol prices in the EU *
		5.2 Diesel prices in the EU *
		5.3 Average annual industrial electricity prices, EU and G7 *
		5.4 Average industrial electricity prices in the EU by size of consumer
		5.5 Average annual domestic electricity prices, EU and G7 *
		5.6 Average domestic electricity prices in the EU by size of consumer
		5.7 Average annual industrial gas prices, EU and G7
		5.8 Average industrial gas prices in the EU by size of consumer
		5.9 Average annual domestic gas prices, EU and G7
		5.10 Average domestic gas prices in the EU by size of consumer
	Annex A - Technical Notes *
	Annex B ­ Calorific Values and Conversion Factors *
		B1: Estimated average gross calorific values of fuels 2001*
		B2: Estimated average gross calorific values of fuels 1970,1980,1990 and 1997 to 2001 *
		B3: Standard conversion factors *
		B4: Average conversion factors for petroleum *
	Annex C - Effective rates of duty on principal hydrocarbon oils, 1964 to 2001 *
	Annex D - Further Sources of Information *
		D1 Energy prices *
		D2 Fuel poverty *
		D3 Department of Trade and Industry publications on energy *
		D4 Energy related websites *
	Explanatory Notes

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Tables in previous publications and update timetable

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Section 1 ­ Introduction

1.1 This is the eighth issue of the 'Quarterly Energy Prices' publication, which covers the prices data formerly included in 'Energy Trends' (Tables 26 to 30) and the 'Digest of UK Energy Statistics' (Chapter 9). The table on page 4 matches the 'Energy Trends' and 'Digest' table numbers to the table numbers in this publication. The publication, including all the tables as Excel files, is also available on the Internet at www.dti.gov.uk/energy/inform/energy_prices/. Monthly updates on the average prices of petroleum products are posted at the same address, as are any tables affected by changes in the GDP deflator.

1.2 In this issue there are analyses of provisional Q4 2002 quarterly prices for both industrial and domestic consumers. There is also a comparison of prices in the EU and G7 countries with those in the UK for 2001. The petroleum product prices are provisional March 2002 prices, whilst the international unleaded petrol and diesel prices are for December 2002.

1.3 This issue also includes an analyses of electricity and gas prices in the EU compared to those in the UK, by size of consumer. These tables are based upon data published by Eurostat, the EU statistical office, in their Statistics in Focus series which present prices as at 1st January and 1st July each year for selected cities in the EU. The tables cover the period from 1st July 1998 to 1st July 2002 and for selected sizes of consumers in selected countries, estimated prices as at 1st October 2002 and 1st January 2003 are also presented. These estimated prices are based upon data provided by Energy Advice Ltd, a private sector company (telephone 020 8393 4230). Details of the methodology used to estimate these prices are given in paragraphs A30 to A32 in the Technical Notes.

1.4 The next issue, published in June, will present provisional Q1 2003 data and final 2002 data for energy prices for the manufacturing sector, industrial and domestic fuel price indices, the price of fuels for major power producers and the price of gas at UK delivery points. The petroleum product prices table will have provisional prices for June 2003 and there will also be an analysis of international petrol and diesel prices as at March 2003. Finally, there will be an analysis of EU and G7 gas and electricity prices.

1.5. Data in the tables are mainly in cash prices. However, price comparisons (unless otherwise stated) refer to movements in data in real terms. These are prices from which the effects of inflation, as measured by the Gross Domestic Product (GDP) market prices deflator, have been removed. The GDP deflator provides an index of inflation in the whole economy and therefore is applicable consistently to domestic and industrial prices. The main domestic comparisons include Value Added Tax (VAT), which has applied to domestic sector prices from 1 April 1994, reflecting the price domestic consumers actually pay, although some price movements excluding VAT are also included.

1.6. For most fuels there is a difference in the prices paid by smaller consumers, typically households, and those paid by larger consumers, usually those in the industrial sector. Indeed there are differences in prices between large and small industrial users. An important reason for the differences is the presence of economies of scale in areas such as energy. In a competitive energy market, larger customers can secure the benefit of these economies by negotiating lower prices. Equally important is the fact that a household's energy demands may be more variable through the day and year (and therefore higher in peak price times) than those of industrial customers who use energy for continuous processes or can load manage. For these reasons the tables show prices separately for domestic and industrial consumers. Although no prices are given for commercial consumers, prices for the domestic sector should be fairly close to those for smaller commercial consumers and industrial prices should provide a reasonable proxy for larger customers in the commercial sector. The source of all data is the Department of Trade and Industry unless otherwise stated.

The main points in this edition are presented below:

Domestic

• Figures for 2002 show an average standard credit electricity bill fell by £1 over average 2001 bills. Comparable falls for average direct debit and pre-payment bills were £2. For gas, 2002 bills show an average standard credit bill has risen by £17 over average 2001 bills. Comparable increases for average direct debit and pre-payment were £15 and £18 respectively. At the end of September 2002, just over 8.7 million (35 per cent) of domestic electricity customers had transferred away from their home supplier. Comparable figures for gas were 7.3 million (36 per cent) of domestic customers. Overall the price paid for all fuel and light in real terms rose in the year 2002 by 0.4 per cent. In that period prices for domestic electricity fell by 2.5 per cent and the price of coal and smokeless fuels fell by 0.3 per cent in real terms. Falls were offset by rises in the price of domestic gas of 2.5 per cent and of 6.0 per cent for heating oils.
  
  

Industrial

• Average annual industrial electricity prices in 2002, including an estimate of the amount of Climate Change Levy (CCL) paid, have decreased by 5 per cent in real terms compared to average annual prices in 2001. Excluding the levy they have fallen by 7 per cent in real terms. Average annual industrial gas prices in 2002, including an estimate of the amount of CCL paid, have decreased by 5 per cent in real terms compared to average annual prices in 2001. Excluding the levy they have fallen by 8 per cent in real terms. The inclusion of CCL increases the average price of coal by 13 per cent, the average price of electricity by 9 per cent and the average price of gas by 7 per cent.

Oil and petroleum product prices 

• The average cost of crude oil acquired by refineries has increased in February 2003 by 3 per cent. Compared to a year ago, the price in February 2003 is 45 per cent higher.

• The pump prices of LRP and ULSP have increased by 2.1 pence per litre in the month to mid March, whilst the price of diesel has risen by 3.3 pence per litre. Compared to a year ago there has been an average price increase of 28.1 per cent for LRP, whilst ULSP and diesel prices have risen by 40.9 and 30.9 per cent respectively. The excluding tax and duty prices of LRP and ULSP have increased by 1.8 pence per litre in the month to March 2003, whilst the price of diesel has risen by 2.8 pence per litre. Margins in mid March stand at around 5.5 pence per litre for ULSP and around 1.3 pence per litre for diesel.

International 

• In December 2002 average UK unleaded petrol prices, including taxes, were the highest in the EU at 74 pence per litre when presented in a common currency basis. Most other EU countries were within a price range of 51 to 70 pence per litre. Average UK diesel prices including taxes in December 2002 were the highest within the EU, and were nearly 35 pence per litre higher than the lowest prices in Greece. The high UK price is mainly due to the taxes levied, which formed 76 per cent of the total price in December 2002 compared to a range of 53 to 66 per cent in the rest of the EU.

• As at 1 July 2002 UK industrial electricity prices, including non-refundable taxes, for small and large size consumers were the sixth and fifth lowest respectively in the EU, while the prices for medium and extra large consumers were the fourth lowest, based on available data. The prices paid by small, medium and large industrial gas prices consumers, including taxes, were the third, fifth and second lowest in the EU. UK domestic electricity prices for small consumers as at 1 July 2002 including taxes were the eighth lowest in the EU based on available data, whilst the prices paid by medium and large consumers were the fourth and third lowest respectively. Domestic gas prices (including taxes) for small and medium consumers were the second lowest in the EU whilst the prices paid by large consumers were the lowest.

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Section 2 ­ Domestic Prices

2.1 Retail price of fuels for the domestic sector

Chart 2.1.1 Fuel price indices in the domestic sector in real terms Q4 1999 to Q4 2002

·         Overall the price paid for all fuel and light in real terms rose in the year to Q4 2002, by 0.3 per cent.   ·         Domestic electricity prices, including VAT, fell by 2.5 per cent in real terms in the year to Q4 2002.  The price of coal and smokeless fuels fell in the period, by 0.3 per cent in real terms.   ·         These falls were offset by a rise in the price of domestic gas of 2.5 per cent between Q4 2001 and Q4 2002.  Real terms prices for heating oils also rose by 6.0 per cent in the period.

Source: ONS, Retail prices index

Background

Table 2.1.1: Retail prices index UK: fuel components

Table 2.1.2: Retail prices index UK: fuel components, relative to GDP deflator

2.1.1 Chart 2.1.1 shows real terms movements in the energy components of the Retail Prices Index (a good general indicator of domestic prices in the UK).

2.1.2 Since Q4 1999 the price of domestic electricity, including VAT, has fallen in cash terms by 2.1 per cent and in real terms by 9.2 per cent. The price of domestic gas has risen in cash terms by 7.2 per cent in this period, and by 0.5 per cent in real terms. Increases in wholesale gas prices in late 2000 began to feed through to domestic customers in mid 2001.

2.1.3 The falls in the prices of domestic electricity and gas in real terms are mainly attributable to downward pressures from price controls set by the regulator, Ofgem, the introduction of full competition into the domestic supply market and the introduction of the New Electricity Trading Arrangements.

2.1.4 These real terms falls in the prices for electricity and gas in the last three years have been offset by rises in the prices for coal and smokeless fuels and heating oils. From Q4 1999 to Q4 2002 the price of heating oils has risen by 14.9 per cent in cash terms and by 6.7 per cent in real terms, while coal and smokeless fuels has risen by 12.5 per cent in cash terms and 4.5 per cent in real terms.

2.1.5 The rise in the price of heating oils over this period is linked to the price of oil (see section 4.2 for further details on crude oil prices). In addition, shortages in world stocks of heating oils in the early winter period of 2000/2001 placed additional upward pressure on the price which peaked in Q4 2000 and has since fallen by 20 per cent in real terms.

Chart 2.1.2 Fuel price indices in the domestic sector in real terms 1970 to 2002

The prices paid by domestic customers for all fuel and light rose by 0.4 per cent in real terms between 2001 and 2002. Domestic electricity prices, including VAT, fell by 2.1 per cent in real terms between 2001 and 2002. Domestic gas prices, including VAT, rose by 3.6 per cent in real terms during the same period.  Prices for domestic coal and smokeless fuels rose by 2.5 per cent in real terms between 2001 and 2002.

Source: ONS, Retail prices index

2.1.6 Overall domestic prices for fuel and light rose by 3 per cent in cash terms and by 0.4 per cent in real terms between 2001 and 2002, chiefly driven by increases in gas prices offset to a large extent by falls in electricity prices for the reasons mentioned at 2.1.3.

2.1.7 In real terms, average annual domestic electricity prices in 2002, including VAT, were 27.6 per cent lower than in 1995 and 26.0 per cent lower than in 1990, the year of privatisation. Average annual domestic gas prices in 2002, including VAT, were 15.7 per cent down on 1995 and 30.9 per cent down on 1986, the year of privatisation.

2.1.8 In real terms, gas and electricity prices in 2002 were 37.9 per cent and 12.8 per cent lower respectively than in 1970. These falls are in part offset by an increase in the price of heating oils of 32.5 per cent and an increase of 11.3 per cent in the price of coal and coke. Overall in 2002, domestic customers saw prices for all fuel and light, which were 14.2 per cent lower than in 1970 in real terms.

2.1.9 Between 1989 and 1992, domestic electricity prices rose in each year resulting in a 6 per cent rise for the whole period (although prior to 1988 prices had fallen each year since 1982). Post 1992 prices have fallen, with the exception of 1994 when VAT was introduced at 8 per cent in April of that year. The fall accelerated in 1996 when measures such as price regulation on distribution charges and the first round of the reduction in the Fossil Fuel Levy (from 10 per cent to 3.7 per cent in November 1996) were major factors in lowering prices by 3.5 per cent on 1995. Subsequent reductions in 1997 and 1998 in both the Levy and VAT (reduced to 5 per cent from 1 September 1997) resulted in a 7 per cent fall in prices in both years. Full competition in the domestic electricity supply market was introduced in May 1999 and has helped in reducing prices by a further 9.2 per cent since 1999.

 

Chart 2.1.3 Fuel price indices in the domestic sector in real terms 1970 to 2002

There was a real terms fall of 8 per cent in the price of heating oils for domestic use from 2001 to 2002. Alongside a fall in the price of electricity for domestic customers, this helped to offset price increases for domestic gas and domestic coal and smokeless fuels.

Source: ONS, Retail prices index

2.1.10 Domestic gas prices moved broadly in line with oil prices until 1983, when a general de-coupling began in many UK fuel prices. Prices then fell fairly steadily over the next 10 years, until by 1993 they were about 25 per cent lower than in 1983, in real terms. The trend was broken in 1994 and 1995 when the introduction of VAT and tariff changes caused prices to rise by around 5 per cent. However, since 1995 there have been falls in prices in each subsequent year, until 2001 where prices rose by 0.5 per cent on 2000. This is mainly due to the advent of competition (see paragraph 2.5.1 for more details), the reduction in VAT and reductions in British Gas' standard tariffs. Upward pressure on gas prices during 2000 and those increases in wholesale gas prices began to feed through to most gas customers from the second quarter of 2001. Despite these increases, real terms prices for domestic gas customers have fallen by 4 per cent since full supply competition was introduced in 1998.

2.1.11 Heating oil prices typically follow crude oil prices, e.g. rising rapidly in 1990 due to the Gulf crisis, before falling back to a post 1973 low in 1995. During 1996 prices rose by 7 per cent, as crude oil prices climbed and international demand was generally higher, before falling back by 5 per cent in 1997 as the oil prices began to weaken. 1998 saw a sharp reduction in crude prices to levels not seen since the early 1970s. As such heating oil prices also fell in real terms to prices not seen for 20 years. Following the agreement of key oil producers to meet production targets crude oil prices began to rise again early in 1999, but have since reduced. Overall average heating oil prices rose by 50.2 per cent between 1998 and 2000 but have since fallen by 12.4 per cent and in 2002 were 18.0 per cent lower than in 1990.

2.1.12 Since 1992 prices of fuels used in motor vehicles have generally increased in real terms year on year until 2001. In 2001 prices fell by 7.2 per cent on the previous year, and were 33.7 per cent higher than in 1990. The increases in petrol prices from 1993 through to 1999 resulted chiefly from Budget increases in the duty payable on petrol and diesel. More detail on petrol and diesel prices is given in Section 4.

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2.2 Domestic electricity bills

Chart 2.2.1 Average UK annual domestic electricity bills 2002

Figures show that in 2002 an average standard credit bill in 2002 fell by £1 over average 2001 bills.  Comparable falls for average direct debit and pre-payment bills were £2.     In 2002 a standard credit customer with a non-home supplier, on average, paid £23 less than a customer who had not changed supplier.  Equivalent savings for direct debit and prepayment meter customers were £24 and £14 respectively.

Background

Table 2.2.1: Average annual domestic electricity bills by home/non-home supplier

Table 2.2.2: Average annual domestic electricity bills for UK countries

Table 2.2.3: Average annual 2001 domestic electricity bills for UK regions

2.2.1 Table 2.2.1 shows electricity bills in 2002 for quarterly credit customers are 31.8 per cent lower in real terms than in 1995 and 4.7 per cent lower than in 2001. Comparable reductions for direct debit customers have been 34.2 per cent and 4.9 per cent respectively. Prepayment (ppm) meter customers have seen reductions of 32 per cent and 4.8 per cent respectively.

2.2.2 Customers on direct debit pay less than customers on other payment methods, as the tables demonstrate, and customers paying by direct debit have also seen larger, longer term falls in bills as set out above. For prepayment customers, the figures show competition is not directly bringing as large savings although the savings seem to have improved since 2001. In the electricity market new suppliers are, on average, charging £14 less than the incumbent supplier. In some areas average bills of a new supplier can be over £8 more per year, although in all areas there are companies offering slightly lower prices.

2.2.3 Table 2.2.3 shows retail prices for electricity purchased by domestic consumers in certain large towns/cities in the United Kingdom. The places have been selected to include one that is in each of the authorised areas of the Public Electricity Supply (PES) companies (see Table A2 in Annex A for further details). The bills are calculated from published price information and unpublished customer numbers provided by the Regional Electricity Companies and their competitor companies as part of the DTI's domestic fuels inquiry and are calculated at a typical annual consumption level of 3,300 kWh for electricity. The tables show bills for the three main payment methods. Tables for 2001, 2000, 1999 and 1998 bills are available on the DTI website.

2.2.4 2002 bills show that for Great Britain, quarterly credit customers in South Wales pay the highest average bills at £281, with customers in the Eastern region paying the lowest at £227. Customers in Northern Ireland have the highest average quarterly credit bill in the UK at £325. At present the electricity market in Northern Ireland is largely monopolistic and subject to Ofreg price controls, although a start has been made to progressively opening the market to competition.

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2.3 Domestic gas bills

Chart 2.3.1 Average UK annual domestic gas bills 2002

Figures for 2002 show an average standard credit bill has risen by £17 over average 2001 bills.  Comparable changes for average direct debit bills show an increase of £14, and pre-payment bills show an increase of £18. Figures for 2002 show, a standard credit customer with a non-home supplier paid, on average, £53 less than a customer who had not changed supplier, with equivalent savings for direct debit customers of £37.  For prepayment meter customers, bills for home and non-home suppliers are now, on average, the same.

Table 2.3.1: Average annual domestic gas bills by home/non-home supplier

Table 2.3.2: Average annual domestic gas bills for UK countries

Table 2.3.3: Average annual 2001 domestic gas bills for UK regions

2.3.1 Gas prices for the majority of domestic customers have increased since April 2001. The effect of British Gas' further increase to its domestic prices of 5.3 per cent from January 2002 is reflected in the bills for 2002.

2.3.2 Table 2.3.1 shows gas bills in 2002 for quarterly credit customers are 22.3 per cent lower in real terms than in 1995 but 1.2 per cent higher than in 2001. Changes for direct debit customers have been 25.7 per cent lower in real terms and 1.3 per cent higher, and prepayment (ppm) meter customers have seen reductions of 22.8 per cent and increases of 1.5 per cent respectively due to the price increases mentioned in 2.3.1. For pre-payment customers, competition is not directly bringing large savings, British Gas' bills are on average the same as those for non-home suppliers, (compared to £14 less in 2000 and £11 less in 2001).

2.3.3 Table 2.3.3 shows retail prices for gas purchased by domestic consumers in certain large towns/cities in the United Kingdom. The places have been selected to include at least one that is in each of the Local Distribution Zones (LDZ) used for gas (see Table A2 in Annex A for further details). The bills are calculated from published price information and unpublished customer numbers provided by British Gas and their competitor companies as part of the DTI's domestic fuels inquiry. They are calculated for typical annual consumption levels of 18,000 kWh for gas. The tables show bills for the three main payment methods. Tables for 2001, 2000, 1999 and 1998 bills are available on the DTI website.

2.3.4 2002 bills show that quarterly credit customers in Wales have the lowest average bill at £306, whilst those in the West Midlands pay most at £313. The differences between the highest and lowest regional bills is less pronounced than in electricity as British Gas have a national pricing policy and as the major supplier their prices will heavily influence all average bills.

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2.4 Domestic electricity competition

Chart 2.4.1 Percentage of domestic standard credit electricity customers not with home supplier by region, September 2002

At the end of September 2002, just over 8.7 million (35 per cent) of domestic electricity customers had transferred away from their home supplier.    Customers paying for their electricity through a prepayment meter have in the past been less likely to switch supplier than those paying by other methods.  However at the end of June 2002 35 per cent of pre-payment meter customers were no longer with their home supplier compared to 32 per cent of standard credit customers.

Background

Table 2.4.1: Percentage of domestic electricity customers by region by supplier type

2.4.1 Competition in domestic electricity supply began on 14 September 1998 with 750,000 consumers in four supply areas. Competition was extended further during late 1998 and early 1999 and was extended to all consumers in Great Britain on 24 May 1999.

2.4.2 By September 2002 just over 8.7 million electricity consumers (35 per cent) were no longer with their home supplier. Table 2.4.1 shows market share at the end of September 2002 and shows that, for those customers who pay by quarterly credit, it is the markets in the North West and the North Wales and Merseyside regions that new suppliers had the most success in.

2.4.3 There are notable differences in market share by payment method. At the end of September 2002, the regional electricity companies had lost around 32 per cent of the credit and 39 per cent of the direct debit market compared to 35 per cent of the pre-payment market.

2.4.4 The rate of transfer in the electricity industry has reduced since Q2 2002 but remains high, averaging just over 421,000 per month in Q3 2002. The continued high transfer rate may reflect increased customer awareness about competition.

2.4.5 The growth of competition is also leading to expansion and innovation in the methods available to pay for electricity and gas. Companies are introducing tariffs with no standing charges and are linking up with other non-energy companies to offer deals linked to air miles or points on shop's loyalty schemes.

2.4.6 Figures published by Ofgem in November 2001 showed that of all the transfers taking place in the gas market in the year to September 2001, 16 per cent were customers transferring back to their home supplier and 9 per cent were customers transferring between non-home suppliers with 74 per cent of transfers being away from home suppliers.

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2.5 Domestic gas competition

Chart 2.5.1 Percentage of domestic standard credit gas customers not with home supplier by region, September 2002

At the end of September 2002, approximately 7.3 million (36 per cent) of domestic gas customers had transferred away from their home supplier. Customers paying for their gas through a prepayment meter have been less likely to switch supplier with only 22 per cent of prepayment meter customers with a non-home supplier at the end of September 2002.

Background

Table 2.5.1: Percentage of domestic gas customers by region by supplier type

2.5.1 The first trial in competitive gas supply started in April 1996 with 500,000 customers in the South West of England. Other areas of the country were opened gradually over the next two years and all customers were able to choose their gas supplier by May 1998.

2.5.2 By the end of September 2002, 7.3 million gas consumers (36 per cent) were no longer supplied by British Gas Trading. Table 2.5.1 gives market share in more detail by local distribution zones (LDZ) and shows that, for standard credit customers, it is the market in the Northern region and in Wales that new suppliers have had most success in. For direct debit customers it is the Northern and Southern regions in which the new suppliers have been most successful, illustrating that the proportion of customers switching supplier varies by payment type and by region. At the end of quarter 3 2002 British Gas had lost around 32 per cent of the credit and 43 per cent of the direct debit market compared to 22 per cent of the pre-payment market.

2.5.3 Figures published by Ofgem in November 2001 showed that of all the transfers taking place in the gas market in the year to September 2001, 26 per cent were customers transferring back to British Gas Trading and 28 per cent were customers transferring between non-BGT suppliers with 46 per cent of transfers being away from BGT.

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2.6 Expenditure on energy in the domestic sector

Chart 2.6.1 Consumers’ expenditure on energy 2001

Expenditure on motor fuels accounted for 51 per cent of consumers’ expenditure on energy products in 2001, a fall from 55 per cent in 2000 and 53 per cent in 1999. Gas and electricity accounted for 21 per cent (increase from 17 per cent in 2000) and 25 per cent (same as last year), of consumers’ expenditure on energy respectively.  Solid fuels and liquid fuels (other than motor fuels) account for 4 per cent between them.

Source: ONS, Household final consumption expenditure

Background

Table 2.6.1: Total household expenditure on energy in the UK

2.6.1 Data in Table 2.6.1 and Chart 2.6.1 are the fuel components of household final consumption expenditure published by the Office for National Statistics in the national accounts.  The figures are at market prices, i.e. the price paid by purchasers, inclusive of taxes (VAT since 1994) and duty.  They are shown on two prices bases, the first being current prices which are the prices prevailing in the year to which they refer.  The second is at constant 1995 prices which is the national accounts base year.

2.6.2 Table 2.6.1 shows the impact of falling energy prices relative to the prices of other goods and services. In 2001 expenditure on energy products represented 4.8 per cent of total consumers’ expenditure, measured at current prices, compared to 5.3 per cent in 2000.  Over time this proportion has fallen gradually, from a high in 1982 of 9.3 per cent.

2.6.3 Expenditure on fuel and light at 1995 prices increased through much of the 1970s with a peak in 1979 mainly caused by the effects of crude oil price rises.  Expenditure at 1995 prices went up by 16.4 per cent between 1980 and 1990, partly reflecting increased consumption in line with increases in their overall standard of living. Since 1990, expenditure on energy has remained steady in 1995 prices, although there have been peaks in expenditure which have coincided with colder winters, particularly in 1991 and 1996.  Overall, consumers’ expenditure on fuel and light in 2001 at 1995 prices was 3.2 per cent lower than in 1991 and 20 per cent higher than in 1981.

2.6.4 Consumers’ expenditure on vehicle fuels and lubricants at 1995 prices has risen steadily over the last thirty years as car ownership has increased.  Since 1990, despite increases in petrol prices, principally as a result of budget tax changes, real expenditure in 1995 prices has fallen by 13.3 per cent, falling by 3.1 per cent between 2000 and 2001. The downward movement in the 1990s is a combined result of fuel switching (i.e. the move to unleaded) and methodology which is described in Annex A paragraph A14.

Chart 2.6.2 Average household expenditure patterns 1960 to 2000/2001

Average expenditure on gas and electricity across all households rose by 4 per cent in the year from 1999/2000 to 2000/2001.  There were also increases in expenditure on heating oils and motor fuel of 34 per cent and 8 per cent respectively. Average household expenditure on all fuels has risen by 41 per cent in the 10 years from 1991.  The biggest rise was expenditure on heating oils which rose by 124 per cent.

Source: ONS, Family Expenditure Survey

Background

Table 2.6.2: Average expenditure each week on fuel per consuming household in the UK

2.6.5 Data in table 2.6.2 are collected via the Family Expenditure Survey (FES) run by the Office for National Statistics.  As such, the data can be affected by external variables such as temperature fluctuations and can also be affected by sample sizes, particularly for solid fuel and heating oils where the samples are smaller.  Chart 2.6.2 shows average household expenditure since 1957 on fuel, light and power and on petrol and oil (data only available disaggregated since 1981) as a proportion of average total household expenditure. It also shows the two largest average expenditure categories (as at 2000/2001) of food and housing.

2.6.6 The chart shows a gradual decrease in the proportion of expenditure spent on fuel, light and power from 6.3 per cent in 1970 to 3.1 per cent in 2000/2001.  Against this, the proportion spent on housing has risen from 12.6 per cent to 16.6 per cent in the same period.  The proportion spent on food has fallen from 25.7 per cent to around the same proportion as housing at 16.0 per cent.  The proportion of expenditure spent on petrol and oil has remained fairly stable since the early 1980s, at 4 per cent in 1981 and 4.1 per cent in 2000/2001.

2.6.7 Chart 2.6.2 shows averages for all households in the UK. The FES also collects data by income decile and this is presented in the table below.

Household Expenditure as a percentage of total expenditure by gross income decile 2000/2001

Source: Family Expenditure Survey

This highlights large variations in the proportion of expenditure on fuel and power and food by income decile.  Fuel and power accounts for over three times more in terms of proportion of spend for those in the lowest income decile compared to those in the highest income decile.  Spending on housing does not see the same variation, with the proportion of spending being broadly similar in all income bands. 

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Section 3 - Industrial Prices

3.1 Energy prices in the manufacturing sector

Chart 3.1.1 Percentage price movements between Q4 2001 and Q4 2002 for heavy fuel oil (HFO), electricity and gas, by size of consumer

Compared to Q4 2001 small and medium consumers of heavy fuel oil have seen price increases of 16 and 17 per cent respectively.  Over the same period moderately large and extra large consumers saw prices increase by 26 and 29 per cent respectively. Electricity consumers saw prices fall by between 4 and 7 per cent in the year to Q4 2002.  This compares to decreases of 3 and 6 per cent for gas consumers.

 Background

Table 3.1.1: Quarterly prices of fuels purchased by manufacturing industry (original units)

Table 3.1.2: Quarterly prices of fuels purchased by manufacturing industry (p/kWh)

Table 3.1.3: Annual prices of fuels purchased by manufacturing industry (original units)

Table 3.1.4: Annual prices of fuels purchased by manufacturing industry (p/kWh)

3.1.1 Provisional data in cash terms for Q4 2002 are presented in Tables 3.1.1 and 3.1.2 from the survey of fuel prices paid by manufacturing industry. Provisional annual prices for 2002 are presented in Tables 3.1.3 and 3.1.4. The prices are excluding the Climate Change Levy (CCL). The survey as it currently stands can not provide robust estimates of the amount of levy paid by size of consumer, however an additional table is included with the table notes, giving the average amount of levy paid by fuel type. All percentage changes given in the text are excluding the CCL.

3.1.2 Small gas consumers have seen prices decrease by 2.2 per cent in the period Q3 2002 to Q4 2002, whilst medium and large consumers have seen prices increase by 2.3 and 14.8 per cent respectively. In comparison to Q4 2001, small, medium and large gas consumers have seen prices decrease by 3.2, 2.9 and 5.9 per cent respectively.

3.1.3 Data for Q4 2002 shows that moderately large and extra large electricity consumers have seen prices increase between Q3 2002 and Q4 2002 by 1.8 and 2.1 per cent respectively. Over the same period prices for small and medium consumers fell by 0.8 and 1.1 per cent respectively

3.1.4 Average coal prices have increased by 15.6 per cent in the quarter to Q4 2002, while average coke prices have decreased by 1.9 per cent. In the year to Q4 2002 average coal prices have increased by 2.1 per cent whilst average coke prices have decreased by 6.6 per cent.

3.1.5 Average prices for MFO and LPG have both increased in Q4 2002 by 7.3 per cent. Prices of HFO and gas oil have increased by a lesser amount, by 2.8, and 2.7 per cent respectively. In comparison with Q4 2001 MFO and HFO consumers have seen average prices increase by 18.3 and 21.8 respectively, whilst LPG and gas oil consumers have seen prices increase by 10.5 and 6.6 per cent.

Chart 3.1.2: Fuel prices for manufacturing industry, in cash terms 1990 to 2002(p)

Over the past five years (1997 to 2002) average industrial electricity prices have fallen by 20 per cent (30 per cent in real terms) and by 6 per cent (9 per cent in real terms) in the last year. Over the past five years (1997 to 2002) average industrial gas prices have increased by 47 per cent (29 per cent in real terms) with a decrease of 8 per cent (11 per cent in real terms) over the last year.

Background

3.1.6 Chart 3.1.2 shows that the average prices (excluding CCL) of coal, heavy fuel oil and gas between 1991 and 2002 (provisional data) were between 0.46 and 1.1 pence per kWh. Electricity prices were considerably higher, averaging 2.9 pence per kWh in 2002, reflecting the costs incurred in converting other fuels into electricity and electricity's greater efficiency in use.

3.1.7 Real price changes by size of user have varied somewhat for each fuel. This reflects the bargaining position of the larger users and factors such as: the timing of the introduction of competition and previous pricing arrangements; length of contracts; underlying factors such as abundance of fuel supply in gas; and the relative (to size) impact of crude prices on fuel oils.

3.1.8 A clear example of these differences is shown in gas prices. Large and small gas users saw real prices fall by around 40 per cent between 1990 and 2000. However, between 1996 and 1998 real prices for large users rose by an average of 15.5 per cent, compared to a fall of 7.5 per cent for small users. The differences largely reflect how the market has developed; more small users are moving to cheaper contracts from their previous tariff terms, whilst large users, who have had to negotiate new contracts from 1997 onwards, have found prices higher as the fierce price competition evident throughout 1995 and 1996 receded.

3.1.9 The largest price falls in 2002 were for large gas and coal consumers with falls of 10.6 and 10.8 per cent respectively. The largest price increases in 2002 were for HFO consumers who saw prices increase by between 7.2 and 14.2 per cent. In contrast, the average price of gas oil and LPG in 2002 were 1.0 and 1.2 per cent lower respectively.

3.1.10 Between 1992 and 2002 the largest electricity users have seen real terms price falls of 42.0 per cent compared to 50 per cent for the smallest users. The larger fall for small users reflects the fact that customers with maximum demand over 100 kW could negotiate cheaper contracts from 1994 onwards, whilst a sizeable number of larger users had price advantages prior to the establishment of competition to over 1 MW customers in 1990 and these took some time to be fully unwound and new contracts established.

3.1.11 The difference in the price paid by the largest and smallest electricity consumers is narrowing in real terms. In 1990 small consumers paid 3.9 p/kWh more than the largest consumers in real 1995 terms, however in 2002 the difference was only 1.7 p/kWh in real 1995 terms.

3.1.12 The real term price of gas increased sharply by 31.7 per cent in real terms between 2000 and 2001, following several years of stable prices. Between 1995 and 1996 there was a sharp fall in prices for all sizes of consumer, but most notably for large consumers, who saw prices fall by 34.3 per cent in real terms.

3.1.13 Heavy fuel oil and gas oil prices have been increasing in real terms since Q4 1998 following the rise in crude oil prices. The average HFO price in 2000 was 44.7 per cent higher than the previous year in real terms, whilst in 2002 the price increased by 8.8 per cent. Similarly average gas oil prices increased by 47.1 per cent between 1999 and 2000, however in 2002 average prices decreased by 1.0 per cent.

3.1.14 Coal prices in real terms have been following a slow downward trend for over 10 years. Compared to 2001, the average real terms cost of coal in 2002 was 9.0 per cent lower, whilst compared to 5 years ago in 1997, prices have fallen by 0.6 per cent in real terms.

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3.2 Average prices of fuels purchased by the major UK power producers and of gas at UK delivery points

Chart 3.2.1: Average price paid by UK power producers for coal, oil and natural gas Q4 2000 to Q4 2002

Between Q4 2001 and Q4 2002 the prices of coal and gas for power stations have decreased by 13 and 4 per cent respectively.  Over the same period, the cost of oil has increased by 59 per cent.    Compared to Q3 2002, the prices of oil and gas have increased by 26 and 25 per cent respectively, whilst the price of coal has increased by 6 per cent.

Background

Table 3.2.1: Average prices of fuels purchased by the major UK power producers and of gas at UK delivery points

3.2.1 The prices in the above chart are presented in a common p/kWh basis for comparison. Fuel cost is not the only factor in electricity generation and therefore a kWh of oil need not necessarily produce the same quantity of electricity as a kWh of gas or coal. Plant efficiency is also greater for gas-fired plants. Further information on plant efficiency is available in the Digest of UK Energy Statistics (http://www.dti.gov.uk/energy/inform/dukes/dukes2002/index.shtml).

3.2.2 Table 3.2.1 shows fuel prices paid by major power producers. Between Q4 2001 and Q4 2002 gas prices have decreased by 4.4 per cent, although in Q4 2002 average prices have increased by 25.2 per cent due to the seasonal nature of gas prices. In Q4 2002 the price paid for gas by the major power producers was 12.7 per cent higher than the price of natural gas at UK delivery points

3.2.3 Oil prices were 26.3 per cent higher in Q4 2002 than in Q3 2002, and 59 per cent higher than in Q4 2001. The price of oil for major power producers in Q4 2002 was at its highest level for over 10 years. Average coal prices in Q4 2002 were 6.2 per cent higher than in Q3 2002 and nearly 13 per cent lower than in Q4 2001.

3.2.4 The price of gas at UK delivery points in Q4 2002 was 18.6 per cent higher than in Q3 2002, and 9.9 per cent lower than in Q4 2001.

Chart 3.2.2: Average price paid by UK power producers for coal, oil and natural gas 1990 to 2002(p)

Compared to 1997, 5 years ago, the average real terms price of coal and natural gas in 2002 has decreased by 23 and 17 per cent respectively. The average cost of oil used by major power producers has increased by 60 per cent in real terms since 1997.  Oil prices tend to fluctuate more than coal and gas, and have been on a general upwards trend, whilst coal and gas have been generally decreasing.

3.2.5 Provisional annual data for 2002 indicates that the price of coal purchased by the electricity generators decreased, compared to 2001, by about £2.54 per tonne. This follows an increase of £2.85 in 2001. In cash terms the average price of coal was 32.2 per cent lower than in 1990 (52.5 per cent in real terms). New coal supply contracts were negotiated in early 1998 following the ending of the previous five-year deals established prior to coal privatisation, resulting in a fall in prices.

3.2.6 In 2002 the price of oil for generation rose by 37.3 per cent. Oil purchased for generation, like all generation fuels, is more likely to be purchased on longer-term contracts. This, coupled with the mix of oils purchased, means that oil for generation is less closely related to spot prices than other industrial users' contracts. Between 1990 and 2002 the price for oil rose by 204.4 per cent (113.4 per cent in real terms). Between 1998, when prices decreased due to falling oil prices, and 2001 the price of oil for generation increased by 105.4per cent.

3.2.7 The use of gas for electricity generation has increased significantly since 1993. Since then its price has fallen by 15.9 per cent in cash terms (31.2 per cent in real terms). In 2001 the price of gas for generation was 8.3 per cent lower than in 2001.

3.2.8 When converted to a common pence per kWh basis, oil was approximately 227 per cent more expensive than coal in 2002, a sharp increase from the 42 per cent differential seen in 1998, when oil prices had fallen substantially. However, comparison of fuel input prices in common units (p/kWh) does not necessarily reflect differences in the cost of generating electricity using different fuels. As well as fuel input costs, generation costs are also affected by non-fuel costs and by the efficiency with which fuel inputs are converted into electricity. For example, combined cycle gas stations have higher efficiencies than conventional steam stations. Therefore, just comparing the fuel input costs per kWh, which show gas to be more expensive, does not provide a picture of full costs.

Chart 3.2.3: Average price of gas at UK⁽¹⁾ delivery points 1980 to 2002 in real and cash terms

The average price of gas at UK delivery points increased by 103 per cent in real terms between 1980 and 1985 when prices peaked. Between 1990 and 2002 the price of gas has fallen by 25 per cent in real terms, although it has increased by 19 per cent in real terms between 1999 and 2002.

3.2.9 Table 3.2.1 and Chart 3.2.3 show the movement in the "beach price" of gas in real and cash terms. The series is derived from gas sales by licensees in the UKCS to delivery points in the UK. It excludes exported gas and is adjusted to include imported gas. The provisional trade adjusted beach price for 2002 averaged 0.557 pence per kWh. This compares to 0.647 pence per kWh in 2001. The beach price series includes the gas levy that was introduced in 1980/81. The levy was abolished from 1 April 1998 and was reduced by 25 per cent to around 0.1 p/kWh for the year 1997/8.

3.2.10 Over supply of gas, principally from 1995 onwards, has led to the development of a spot gas market where some producers un-contracted gas, and initial purchases in excess of their own needs, are sold. As a result the spot price fell sharply from about 0.69 pence per kWh to below 0.35 pence per kWh (10 pence a therm) in 1995. Since then the spot and new International Petroleum Exchange futures markets have grown in volume terms. Prior to the Spring/Summer of 2000, the price of gas on these markets had developed a seasonal trend peaking at around 0.5 p/kWh (15p/therm) in December, but falling to around 0.35 p/kWh in the summer.

3.2.11 In the Spring/Summer of 2000 there was a sharp increase in the spot price of gas and an increase in the volatility of the price. The average price in June 2000 was over 80 per cent higher than the price in the previous year. The increase in price is attributable to increased trade across the Bacton - Zeebruge Interconnector. As the continental gas price is tied to oil, it is more attractive to export gas when the oil price is high.

3.2.12 Following the peak in prices in January 2001, there was a general downwards trend in the spot price until June 2002 when prices became fairly static for several months. In November 2001 prices began to increase again following the usual seasonal pattern. Prices fell sharply in January 2002 by 0.5p/kWh and continued falling, until levelling off during early summer. In late July prices fell sharply, to as little as 0.1p/kWh, while the Bacton - Zeebruge Interconnector was closed. Once the Interconnector was operational again, prices increased steadily, peaking in January 2003 at 1.34p/kWh.

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3.3 Fuel price indices for the industrial sector

Chart 3.3.1 Fuel price indices in real terms⁽¹⁾ excluding the Climate Change Levy from Q4 2000 to Q4 2002

Average industrial electricity prices excluding the Climate Change Levy (CCL), fell in real terms by 11 per cent in the year to Q4 2002 whilst industrial gas prices excluding CCL fell by 7 per cent in real terms. Over the same period the price of coal decreased by 1 per cent while the price of HFO increased by 18 per cent.

(1) Deflated using the GDP implied deflator at market prices with base year of 1995
 but rescaled to 1990=100.

Background

Table 3.3.1: Current and real terms fuel price indices for the industrial sector excluding the Climate Change Levy

3.3.1 Fuel price indices, excluding the Climate Change Levy (CCL), are presented in Table 3.3.1 based upon data supplied by energy suppliers. All percentage changes given in the text below are excluding CCL.

3.3.2 Table 3.3.1 shows that the average price for all fuels combined increased by 5.5 per cent in real terms between Q3 2002 and Q4 2002, whilst seasonally adjusted prices decreased by 0.1 per cent.

3.3.3 The largest price increase over the period Q3 2002 to Q4 2002 was seen by gas consumers with a price increase of 18.7 per cent in real terms. This increase is mainly due to the seasonal nature of gas prices which means that prices usually increase in the last quarter of the year. Compared to a year ago average gas prices have fallen by 7.2 per cent.

3.3.4 The average price of both electricity and heavy fuel oil increased by 1.7 per cent in real terms in the quarter to Q4 2002. Compared to a year ago the average price of electricity has fallen by 10.6 per cent in real terms, whilst heavy fuel oil consumers have seen prices increase by 18.3 per cent in real terms. The Q4 2002 price for heavy fuel oil is the highest price in real terms since 1987, with the exception of Q4 2000.

3.3.5 Average coal prices have increased during Q4 2002 by 14.3 per cent in real terms, although compared to a year ago average coal prices have decreased slightly, by 0.8 per cent in real terms.

Chart 3.3.2 Fuel price indices in real terms⁽¹⁾ including the Climate Change Levy from Q4 2000 to Q4 2002

Average industrial electricity prices including the Climate Change Levy (CCL), decreased in real terms by 9 per cent in the year to Q4 2002. Over the same period, industrial gas prices including CCL decreased by 7 per cent in real terms, while average coal prices fell by 1 per cent in real terms. The inclusion of CCL increases the average price of coal by 13 per cent, the average price of electricity by 9 per cent and the average price of gas by 7 per cent.

(1) Deflated using the GDP implied deflator at market prices with base year of

 1995 but rescaled to 1990=100.

Background

Table 3.3.2: Current and real terms fuel price indices for the industrial sector including the Climate Change Levy  

3.3.6 Fuel price indices including the Climate Change Levy (CCL) are presented in Table 3.3.2. The average amounts of CCL paid are based upon data supplied by gas and electricity suppliers and from the survey of fuel prices paid by manufacturing industry. The inclusion of CCL increases the average price of coal by 12.5 per cent, the average price of electricity by 9.0 per cent and the average price of gas by 7.1 per cent. The Climate Change Levy does not apply to heavy fuel oil. All percentage changes given in the text below are including CCL.

3.3.7 The average price for all fuels combined increased by 5.7 per cent in real terms between Q3 2002 and Q4 2002. Seasonally adjusted prices increased by 0.3 per cent in real terms over the same period.

3.3.8 The average price of all fuels increased during Q4 2002, with gas consumers seeing the largest increase of 18.6 per cent in real terms. However, compared to Q4 2001 gas prices have decreased by 7.1 per cent in real terms.

3.3.9 The average price of electricity has increased by 2.1 per cent in real terms during Q4 2002, although compared to Q4 2001 the price has decreased by 9.4 per cent in real terms. Although electricity prices have increased slightly in Q4, they are still amongst the lowest prices for over 20 years.

3.3.10 Coal consumers have seen prices rise sharply during Q4 2002, with a price increase of 12.4 per cent in real terms. Compared to Q4 2001 coal prices have decreased slightly by 1.1 per cent in real terms.

Chart 3.3.3: Industrial fuel price indices in real terms⁽¹⁾ 1970 to 2002

Compared to 1990, the average price of heavy fuel oil in 2002 has increased by 26 per cent in real terms, with an increase of 31 per cent since 1995. In comparison, the annual average price of gas has fallen by 23 per cent in real terms since 1990, however it has increased by 0.3 per cent since 1995.

(1) Deflated using the GDP implied deflator at market prices with base year

of 1995 but rescaled to 1990=100

3.3.11 Tables 3.3.1 and 3.3.2 shows the long-term index series for industrial fuel prices, whilst Chart 3.3.2 shows the movement in industries average fuel prices since 1970 in real terms. The series for electricity and gas are averages of all industrial users calculated from energy supply company data. Coal and heavy fuel oil data are based on the average data as published in Table 3.1.2. All percentage changes are including the Climate Change Levy.

3.3.12 Real terms average annual electricity prices are at their lowest levels since 1970 despite the introduction of the Climate Change Levy in 2001. Compared to 1990, average annual electricity prices in 2002 were 39.1 per cent lower in real terms. Between 1995 and 2002 electricity prices have fallen by 34.0 per cent in real terms, and between 2001 and 2002 there has been a fall of 4.9 per cent.

3.3.13 Although industrial gas prices in 2002 have fallen by 4.9 per cent, the price is still 31.0 per cent higher than in 1999, before the sharp increase in the spot price of gas during the Spring and Summer of 2000.

3.3.14 UK heavy fuel oil prices moved broadly in line with international markets (and crude oil prices) rising by 5.6 per cent in real terms in 2002. The price of heavy fuel oil rose sharply by 41.6 per cent in 2000 bringing the price back to levels last seen in 1987.

3.3.15 Provisional annual coal prices in 2002, including CCL, decreased by 5.5 per cent in real terms. Coal prices have been on a steady downwards trend since 1983. The exception to this is in 2001 when prices increased by 13 per cent partly due to the introduction of the Climate Change Levy that year. Compared to 1993, the average price of coal has fallen by 63.9 per cent in real terms.

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Section 4 ­ Oil and Petroleum Product Prices

4.1 Typical retail prices of petroleum products

Chart 4.1.1 Typical retail prices of motor spirits from December 2000 to March 2003

In mid March 2003 a litre of ULSP was on average 78.7 pence, about 2.7 pence per litre less than lead replacement petrol (LRP) and 2.6 pence per litre less than diesel.   ULSP prices were 7 pence per litre higher than a year ago, and diesel prices 6 pence per litre higher. .

Background

Table 4.1.1: Typical monthly retail prices of petroleum products and a crude oil price index 

Table 4.1.2: Average annual retail prices of petroleum products and a crude oil price index 1977 to 2001

Table 4.1.3: Typical annual retail prices of petroleum products 1970 to 2001

4.1.1 Prices of motor spirits have risen in the month to mid March. In terms of prices at the pump, the prices of LRP and ULSP have increased by 2.1 pence per litre, whilst the price of diesel has risen by 3.3 pence per litre.

4.1.2 In the year to mid March 2003 increases of 5.3, 7.2 and 6.5 pence per litre were seen for LRP, ULSP and diesel respectively – these represent increases of 6.9 to 10.1 per cent in the price of these fuels.

4.1.3 The excluding tax and duty prices of LRP and ULSP have increased by 1.8 pence per litre in the month to March 2003, whilst the price of diesel has risen by 2.8 pence per litre. Compared to a year ago there has been an average price increase of 28.1 per cent for LRP, whilst ULSP and diesel prices have risen by 40.9 and 30.9 per cent respectively.

4.1.4 In the month to mid February the price of super unleaded increased by 0.8 pence per litre and was 3.6 per cent higher than a year ago, an actual increase of 2.8 pence per litre. Retail prices of standard grade burning oil and gas oil increased in the month to mid February by 2.4 and 1.8 pence per litre respectively. Compared to a year ago, the price of standard grade burning oil in February 2003 was 42.2 per cent higher, as was its price excluding taxes. The price of gas oil was 41.3 per cent higher compared to February 2002, however the price excluding taxes was 53.5 per cent higher.

Chart 4.1.2: Annual average retail price of motor spirit and diesel 1990 to 2002

Motor fuel prices increased at a steady rate following the Gulf crisis in 1990/91, chiefly as a result of duty changes.  Compared to 2001, the average prices of LRP, ULSP and diesel in 2002 have decreased by 2.7, 2.5 and 2.4 per cent respectively. .

4.1.5 A key feature illustrated by Table 4.1.2 and Chart 4.1.2 is that since the Gulf crisis in 1990/91 motor fuel prices have increased at a steady rate, chiefly caused by Budget tax changes as listed in Annex C. Strong competition in late 1995 and early 1996 with promotions such as "Price Watch" led to sharp price falls and at the peak of the price competition in April 1996 prices had fallen to below December 1995, pre Budget levels. To achieve these price cuts many operators cut margins on retail sales from a traditional 4 to 5 pence per litre down to as low as 1 pence per litre in some cases in mid 1996. During 1997 and 1998 as price competition stabilised somewhat (although remaining strong at a local scale) and crude oil prices moved sharply downward, margins moved back towards their previous levels. With the sharp increase in crude oil prices in 1999 and 2000 the margins reduced once again and for limited periods they were at levels which many petrol retailers say are unsustainable, falling as low as 1 pence per litre in September 2000.

4.1.6 In 2001 the margins for unleaded petrol ranged from 2 pence per litre around the time of the budget, to over 8 pence per litre in July. From October 2001 the margins have been more stable, ranging from 3.5 to 5.5 pence per litre. During the period July to October 2002 margins remained constant at around 4 pence per litre. Following this period, margins increased sharply to nearly 6.5 pence per litre in mid November, only to fall again to 3.6 pence per litre by the end of December. Since then margins have been quite volatile, ranging from 3.6 pence per litre to 5.5 pence per litre.

4.1.7 The margins for diesel were higher than those for unleaded petrol for the majority of 2001 and 2002. However they steadily decreased from November 2001 until October 2002 when they reached the same level as margins for ULSP. This convergence of margins continued until February 2003 when the margin for diesel began to fall, whilst the margin for ULSP began to climb.

4.1.8 Duty is not the only factor that influences the price of petrol. Chart 4.1.3 shows the movement in the excluding taxes price of premium unleaded and diesel from January 1989 to June 2002. Between March 1999 and July 2000 the price of crude oil increased by around 150 per cent in cash terms. Linked to this the prices of motor fuel excluding duty increased by around 140 per cent or 13 pence per litre.

Chart 4.1.3: Price of premium unleaded petrol and diesel excluding taxes January 1990 to March 2003

Between January 1999 (when prices troughed) and July 2000 (when prices peaked), the price of premium unleaded petrol, excluding taxes, increased by 145 per cent. The price of diesel, excluding taxes, increased by a similar amount between February 1999 and December 2000 (when diesel prices peaked).

4.1.9 A historical perspective of petrol and diesel prices is given in Table 4.1.3. This shows that petrol prices increased only gradually from 1954 to 1973, when they were affected by the sharp rise in crude oil prices and then controlled by Government Order during most of 1974. The next big increase was during 1979 as a result of the second oil price shock. Prices then rose until 1985 before falling during 1986. The Gulf crisis of 1990/91 had only a temporary effect on prices (shown in the January 1991 figures) with the prices of motor fuels in recent years being driven upwards by tax changes but offset to some extent by strong competition in the retail sales market.

4.1.10 A reduced rate of duty for unleaded petrol, initially one pence per litre lower than 4 star, was introduced in the 1987 Budget. This duty difference was increased in stages to reach nearly 5 pence per litre after the March 1993 Budget. Since then the duty differential has been held at or slightly above that level in subsequent changes of duty. In April 2000 the duty differential was 5.9 pence (or 6.9 pence including VAT), however the sales of leaded petrol ceased in January 2000, except for a limited number of special cases. 4 star was replaced by lead replacement petrol (LRP) with the same duty rate as super unleaded petrol, 2.1 pence per litre above that for premium unleaded.

4.1.11 In the Pre-Budget report in November 2000 it was announced that there would be a cash freeze in all road fuel duties and a cut in the duty on ultra low sulphur petrol (ULSP) provided oil companies could guarantee nation-wide availability of this fuel. This duty cut would widen its differential with standard unleaded petrol to 3 pence per litre. ULSP offers environmental benefits over ordinary unleaded petrol and enables new fuel efficient technologies, such as Gasoline Direct Injection Engines (GDI), to be used. By March 2001 ULSP was widely available from the major petrol retailers across the UK, however it was recognised that the final stages of transition from premium unleaded petrol to ULSP might take longer for independent retailers. Budget 2001, on 7 March, announced that as well as a 2 pence per litre cut in duty on ULSP, there would also be a temporary reduction in duty for unleaded petrol of 2 pence per litre from Budget day to 14 June 2001 to ensure that everyone would have access to the duty cuts. There were no changes made to duty rates in the April 2002 budget.

4.1.12 Prior to 1994 diesel was cheaper than premium unleaded by as much as 3 pence per litre in some months. Since then, duty rates were first equalised, in monetary terms, in 1994 and then raised more for diesel than unleaded in the March 1998 Budget. In this period the differential in prices fluctuated but the position in 1996 to 1998 was typically one of diesel being around a penny per litre more expensive. The further tax differential in favour of unleaded in the 1999 Budget meant that in early 1999 unleaded was up to 3 pence per litre cheaper than diesel. In the 1998 Budget, a lower duty rate was introduced for ultra low sulphur diesel (ULSD). The rate was originally set 2 pence per litre lower than for standard diesel, but was put at a discount of 3 pence per litre in the 1999 Budget and remained at this discount during 2000. During the summer of 1999 the majority of diesel being sold changed to ULSD and prices quoted for July 1999 onwards are for ULSD. In the March 2001 Budget the differential between standard diesel and ULSD was extended to 6 pence per litre, as the duty on ULSD was cut by 3p per litre to make it the same duty rate as ULSP.

4.1.13 Prices for super-unleaded motor spirit are available only from January 1991. Sales of the fuel have been falling partly as it became the most expensive fuel following the duty rate being increased above that for premium unleaded in 1996. However, the duty rate of super-unleaded motor spirit was reduced from 1 October 1999 to facilitate the introduction of Lead Replacement Petrol (LRP). Following the Budget in March 2001 there is no longer a separate duty rate for LRP and super-unleaded petrol. The higher rate for higher octane unleaded petrol, which included these fuels, was abolished on 7 March 2001. Duty is now charged on the fuel at the rate appropriate to unleaded petrol or ULSP, dependent upon the sulphur and aromatics content of the fuel.

Chart 4.1.4: Typical retail prices of standard grade burning oil and gas oil January 1990 to February 2003

In mid February 2003 a litre of standard grade burning oil was on average 20.2 pence, while a litre of gas oil was 20.4 pence.   Compared with February 2002, the prices of standard grade burning oil and gas oil have increased by 42 per cent and 41 per cent respectively.

4.1.14 Standard grade burning oil and gas oil prices generally move in line with crude oil prices. This means that events such as the Gulf crisis in 1990/91 caused the price of these fuels to rise initially but then fall back, as crude oil prices rose and fell. Annual average prices rose sharply during 1996, to near 1990 levels, before gradually easing throughout 1997. 1998 saw a dramatic fall in prices to new real term lows since data has been available in 1977. This was followed by dramatic increases in the price during 1999 and 2000, mirroring the movements in crude oil prices.

4.1.15 Prices for standard grade burning oil and gas oil peaked at around 25 and 26.4 pence per litre respectively in September and October 2000. Over the next four months prices fell sharply by between 26 and 29 per cent and then remained at this level until September 2001. Between September and October 2001 the price of standard grade burning oil and gas oil fell by 16.4 and 12.3 per cent respectively. This downwards trend continued until March 2002 when prices began to rise again, peaking in October 2002.

4.1.16 Prices fell sharply in November 2002 for standard grade burning oil and gas oil by 13.3 and 10.3 per cent respectively. Since then prices have been rising steadily, increasing by around 30 per cent between November 2002 and February 2003.

4.1.17 In real terms, standard grade burning oil and gas oil prices fell by 15.8 and 5.6 per cent respectively between 1990 and 2001. Between 2001 and 2002 average prices for standard grade burning oil and gas oil decreased by 13.6 and 16.7 per cent respectively, however prices have increased by 24.7 and 18.7 per cent during the first two months of 2003.

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4.2 Crude oil prices

Chart 4.2.1: Index of crude oil prices October 2000 to February 2003

The average cost of crude oil acquired by refineries has increased in February 2003 by 3 per cent. Compared to a year ago, the price in February 2003 is 45 per cent higher.

(1)The index represents the average price paid by refineries

for the month and is calculated in sterling on a cif basis, see paragraph 4.2.1.

Background

Table 4.1.1: Typical monthly retail prices of petroleum products and a crude oil price index 

Table 4.1.2: Average annual retail prices of petroleum products and a crude oil price index 1977 to 2000

4.2.1 Crude oil prices are shown in Table 4.1.1 as an index based on a "basket" of both indigenous and imported crude oil prices that are used as an input, along with other fuel prices, for the Producer Prices Index (produced by ONS). The index represents the average price paid by refineries for the month and is calculated in sterling on a cif basis.

4.2.2 The crude oil index decreased in February 2003 by 2.7 per cent. This follows an increase in January 2003 of 10.5 per cent. Compared to December 2001 when prices troughed, the price in January 2003 is 55.6 per cent higher.

4.2.3 The Organisation of Petroleum Exporting Countries (OPEC) met on 11th March 2003 and agreed to maintain it's current production levels of 24.5 mb/d. OPEC stated that this was because supplies are adequate to meet current market requirements, taking into consideration the restoration of Venezuelan production to normal levels and the traditionally lower seasonal demand in the second quarter.

Chart 4.2.2: Index(1) of crude oil prices January 1991 to February 2003

Between December 1998 , when prices troughed and November 2000 when prices peaked, the index has increased by 279 per cent. Over the past ten years (February 1993 to February 2003) the average cost of crude oil acquired by refineries has increased by 70 per cent.  Compared to a year ago, prices have increased by  45 per cent.

Index represents the average price paid by refineries

for the month and is calculated in sterling on a cif basis, see paragraph 4.2.1.

4.2.4 Movements in the price of crude oil affect the price of various domestic and industrial fuels as well as petroleum products. The price of crude oil can change for a variety of reasons, but a common feature is that they are all global events. Examples include: oil shortages (1973); political uncertainty (1990/1); and general over supply coupled with weaker Far East demand (1998). Since 2000 OPEC has sought to stabilise oil prices by controlling the production levels of member countries. OPEC has decided that $25 per barrel is a fair price for their oil and if the price of a basket of crude oils is higher than $28 per barrel for 20 consecutive days or lower than $22 per barrel for 10 days they will consider either a cut or an increase in production.

4.2.5 The recent history of crude oil prices is of them peaking, in cash terms, in 1984 before falling by 60 per cent to a low point in 1988. Prices then rose in 1989 and 1990, the latter as a result of the Gulf crisis before falling back again in early 1991 then remaining fairly stable (for crude) at about their 1986 level until mid 1995, although the withdrawal of Sterling from the exchange rate mechanism produced a small peak in 1993 as the pound was devalued relative to the dollar.

4.2.6 Crude oil prices rose sharply in late 1995 and continued to do so through 1996 as a result of factors such as the uncertainty over the re-introduction of Iraqi exports, low oil stocks and lower than expected non-OPEC production. The upward pressures peaked in October 1996 when the price was higher than at any time since December 1990, during the Gulf crisis. Crude prices fluctuated throughout 1997 and by October were around the same level as in January 1996. From October 1997 crude prices fell virtually every month until December 1998 chiefly on the basis of excess supply made worse by economic uncertainty in the Far East and milder winter weather. During 1998 the average price of crude oil fell by 35 per cent in cash terms making crude prices over 50 per cent lower in real terms in 1998 than in 1990 and 5 per cent lower than in 1970.

4.2.7 Average crude oil prices began increasing in late 1998 when production cuts were agreed upon by key oil producers to tackle the general over supply and reduced Far East demand that precipitated the rapid fall in prices in 1998. Prices peaked in late 2000 at nearly $34 per barrel, before falling to $22 per barrel in January 2001. During 2001 prices stayed within the OPEC price band of $22 to $28 per barrel until the terrorist attacks on the US in September when prices fell sharply by $7 per barrel within two weeks. Prices remained at around $18.5 until February 2002 when prices began to rise again, peaking at $28 per barrel in early October due to concerns about war with Iraq. By November prices had fallen sharply as the threat of war lessened, however a strike in Venezuela and increasing tensions in Iraq pushed prices back up to $33 per barrel in mid March 2003.

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Section 5 ­ International Comparisons

5.1 Premium unleaded petrol prices in the EU

Chart 5.1.1 Average EU premium unleaded petrol prices in pence per litre as at December 2002

In December 2002 average UK unleaded petrol prices, including taxes, were the highest in the EU at 74 pence per litre when presented in a common currency basis. Most other EU countries were within a price range of 51 to 70 pence per litre.  The lowest price was in Greece at 46 pence per litre. The average excluding taxes price in the UK was the third lowest in the EU.

Source: European Commission Oil Bulletin

Background

Table 5.1.1: Premium unleaded petrol prices in the EU

5.1.1 It is important when comparing international prices to keep in mind the impact of exchange rates (as the data are presented in a common pound sterling basis, the changing level of the pound will cause some changes in relative prices) and inflation rates in individual countries.

5.1.2 In December 2002 a litre of unleaded petrol cost 1.1 pence more in the UK than in the second highest country, Netherlands, and was over 27 pence higher than prices in Greece, which had the lowest prices. Compared to November 2002 the average price of unleaded petrol excluding tax and duty in the EU has increased by 2.5 per cent whilst in the UK it has decreased by 2.1 per cent. Over the same period, the average price of unleaded petrol including tax in the EU has increased by 1.3 per cent, whereas the average price in the UK has decreased by 0.6 per cent.

5.1.3 Compared to December 2001, the average price of unleaded petrol excluding tax and duty in the EU has increased by 14 per cent, whilst in the UK prices have risen by 21.5 per cent. Over the same period, the average price of unleaded petrol including tax in the EU has increased by 10.5 per cent, whereas the average price in the UK has increased by 5 per cent.

5.1.4 UK prices at the pump are the highest in Europe, despite having one of the lowest prices before tax. It should, however, be remembered that the strong pound in recent years relative to the Euro and other EU currencies will magnify the differences. In December 2002 the tax component of the pump price was 77 per cent in the UK, compared to the next highest of 74 per cent in France and Germany. The lowest tax component was 57 per cent in Greece. The UK excluding tax price was the third lowest in the EU at 16.9 pence per litre whilst the highest was in Netherlands at nearly 22 pence per litre.

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5.2 Diesel prices in the EU

Chart 5.2.1 Average EU diesel prices in pence per litre as at December 2002

Average UK diesel prices including taxes in December 2002 were the highest within the EU, and were nearly 35 pence per litre higher than the lowest prices in Greece. The high UK price is mainly due to the taxes levied, which formed 76 per cent of the total price in December 2002 compared to a range of 53 to 66 per cent in the rest of the EU.  The average excluding taxes price in the UK was the second lowest in the EU.

Source: European Commission Oil Bulletin

Background

Table 5.2.1: Diesel prices in the EU

5.2.1 Compared to November 2002, the average price of diesel in the EU, excluding tax and duty, has increased by 3.8 per cent in December, whilst the UK price has decreased by 1.8 per cent. Over the same period, the average price of diesel including tax has increased by 2.3 per cent in the EU, whereas in the UK the including tax price has decreased by 0.5 per cent.

5.2.2 Compared to December 2001, the excluding tax and duty average price of diesel in the EU has increased by 8.4 per cent, whereas the UK price has increased by 1.8 per cent. Over the past year, the average price of diesel including tax has increased by 7.7 per cent in the EU, while in the UK it has increased by 0.5 per cent.

5.2.3 UK prices at the pump are the highest in Europe, despite having the second lowest prices before tax. It should, however, be remembered that the strong pound in recent years relative to the Euro and other EU currencies will magnify the differences. Diesel prices in the UK were nearly 35 pence per litre higher than in Greece, which had the lowest prices.

5.2.4 In December 2002 the tax component of the pump price was 76 per cent in the UK, compared to the next highest of 66 per cent in France and Germany. The UK excluding tax price was the second lowest in the EU at 18.1 pence per litre whilst the highest was in Finland at 23.3 pence per litre.

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5.3 Average industrial electricity prices, EU and G7

Chart 5.3.1 Average industrial electricity prices in 2001, EU and G7

In 2001 average UK industrial electricity prices both including and excluding taxes were the third lowest in the EU out of seven countries. Prices in the UK including taxes, were 13.2 per cent lower than the EU and G7 median.   Data for 2001 are not available for all countries.  The above analysis is based on the available data.

Notes: Data is not available for Austria, Belgium, France, Germany, Greece, Italy, Luxembourg, Sweden, Japan, Canada and the US

Source: Derived from IEA Energy Prices and Taxes Q4 2002

Background

Table 5.3.1: Annual average industrial electricity prices in the EU and G7 countries including and excluding taxes

5.3.1 Prices vary between countries for many reasons including differences in indigenous resources and market structures.

5.3.2 In 2001 the UK's price was the third lowest in the EU both including and excluding taxes. This is a marked improvement from its position in 1985 when the UK price, both including and excluding taxes, was eleventh lowest. Comparative data for the G7 countries is only available for the US excluding taxes.

5.3.3 In 2001, the UK's price including taxes was 13.2 per cent lower than the EU and G7 median based upon data for seven countries. This follows a steady improvement in its position from 1980, when only Italy and Japan had higher prices. UK prices were 33 per cent higher than prices in Finland, which had the lowest prices.

5.3.4 Between 2000 and 2001 UK industrial electricity prices, excluding taxes, decreased by 8.7 per cent. This was the largest decrease over this period based on the available data. The largest increase over this period, calculated using prices in national currencies, was in Ireland where prices rose by 26.9 per cent.

5.3.5 Between 2000 and 2001 UK industrial electricity prices, including taxes, decreased by 3.5 per cent. The smallest increase over this period was 1.2 per cent in Spain, based on the available data. The largest increase over this period, calculated using prices in national currencies, was in Ireland where prices rose by 26.9 per cent.

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5.4 Average industrial electricity prices in the EU by size of consumer

Chart 5.4.1 Estimated average industrial electricity prices for extra large consumers in the EU as at 1 January 2003

Estimated average industrial electricity prices in the UK for extra large consumers as at 1 January 2003 were the fourth lowest in the EU excluding taxes and were 8.7 per cent lower than the EU median. Estimated prices for extra large consumers in the UK including taxes were the fourth lowest in the EU and were 11.3 per cent lower than the median price.

Notes: Data is not available for Greece, Ireland, Luxembourg and Portugal. 
Extra large consumers are defined as having an annual consumption of 420GWh per annum with a maximum demand of 80MW.

Source: Energy Advice Ltd Electricity and Gas Price Comparisons: January 2003

Background

Table 5.4.1: Average industrial electricity prices for small consumers in the EU

Table 5.4.2: Average industrial electricity prices for medium consumers in the EU

Table 5.4.3: Average industrial electricity prices for large consumers in the EU

Table 5.4.4: Average industrial electricity prices for extra large consumers in the EU

5.4.1 Industrial electricity prices as at 1 July 2002 are presented in Tables 5.4.1 to 5.4.4. Estimated prices as at 1 October and 1 January 2003 are also presented for small, medium and large consumers. The methodology used in estimating the prices is set out in paragraphs A30 to A32 of the Technical Notes along with definitions of the size bands.

5.4.2 Estimated data as at 1 January 2003 indicates that the including tax price of electricity in the UK for small consumers was the sixth lowest out of nine countries and was 0.3 per cent higher than in January 2002. Estimated prices for small consumers excluding taxes indicate that the price of electricity in the UK was the fifth lowest out of nine countries and was the same price as in January 2002.

5.4.3 Between January 2002 and January 2003, Finland and Germany had the largest price increase including taxes of 7.8 per cent and 11.6 per cent respectively, while average prices for Spain and Denmark decreased by 3.0 per cent and 2.7 per cent respectively. Prices excluding taxes increased in most countries where data is available, except in Spain where prices fell by 3 per cent. Finland had the largest price rise of 7.1 per cent over this period. Prices in Spain fell by 3 per cent. The highest prices including taxes were in Italy at 63 per cent above the UK prices, while Belgium had the highest prices excluding taxes at 35 per cent higher than the UK price. The lowest prices were in Sweden at 49 per cent below the UK price including taxes and 46 per cent below excluding taxes.

Chart 5.4.2 Average industrial electricity prices⁽¹⁾ in the EU by size of consumers as at 1 July 2002

Notes: Where national prices are not available, data for the following cities have been used instead: Austria: Vienna, France: Paris, Germany: Dusseldorf, Greece: Athens, Ireland: Dublin, Netherlands: Rotterdam, Portugal: Lisbon, Spain: Madrid

(1)  Including taxes where not refunded 

Source: Derived from Eurostat Statistics in Focus Electricity prices for EU industry on 1 July 2002

5.4.4 Estimated data for medium consumers as at 1 January 2003 indicates that the UK price, both including and excluding taxes, was the fifth lowest out of eight EU countries. Compared to January 2002, the UK price in January 2003 was 1.5 per cent lower including taxes and 1.3 per cent lower excluding taxes. Finland and Germany saw including tax prices rise by 16.7 per cent and 24.1 per cent respectively. Similarly, Finland and Germany saw the largest increases in excluding tax prices of 17.9 per cent and 9.8 per cent. The highest including taxes price was in Italy, at 63 per cent higher than the UK price (40 per cent higher excluding taxes), whilst the lowest price including taxes was in Sweden, at 46 per cent lower than the UK price (44 per cent excluding taxes).

5.4.5 Estimated data as at 1st January 2003 indicates that the price of electricity in the UK for large consumers, both including and excluding taxes, was the third lowest out of seven countries. Compared to January 2002, including tax prices in the UK were the only ones that had decreased, by 0.8 per cent. The largest rise in prices over this period, on an including tax basis, was in Germany where prices increased by 18.1 per cent. Most other countries saw price rises of 1.2 to 12.4 per cent. On an excluding tax basis the UK prices fell by 0.7 per cent with Spain the only other EU country showing a decrease (5.0 per cent). Over the same period excluding tax prices in other EU countries increased by between 0.6 and 12.8 per cent with Finland having the largest increase. The highest prices in January 2003 were in Italy at over 37 per cent higher than the UK price excluding taxes and 60 per cent higher than the UK price including taxes. The lowest prices, both including and excluding taxes, were in Sweden (42 and 40 per cent respectively below the UK price).

5.4.6 Data as at 1st January 2003 indicates that the including tax price of electricity in the UK for extra large consumers was the fourth lowest out of eleven countries and was 11.3 per cent lower than the median price. The highest price including taxes was in Germany, at 45 per cent higher than the UK price (18 per cent excluding taxes), whilst the lowest price was in Sweden, at 29 per cent below the UK price (26 per cent excluding taxes). On an excluding taxes basis the UK prices was the fourth lowest out of eleven countries and was 8.7 per cent lower than the EU median. Italy had the highest price excluding tax at 31 per cent higher than the UK.

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5.5 Average annual domestic electricity prices, EU and G7

Chart 5.5.1 Average domestic electricity prices (including taxes) in 2001, EU and G7

In 2001 average UK domestic electricity prices, including taxes, were fourth lowest in the EU out of nine countries. Prices in the UK including taxes were 7.2 per cent lower than the EU and G7 median. Data for 2001 are not available for all countries.  The above analysis is based on the available countries data.

Notes: Data for Belgium, France, Germany, Greece, Italy, Sweden, Canada, Japan and the US is not available.

Source: Derived from IEA Energy Prices and Taxes Q4 2002

Background

Table 5.5.1: Annual average domestic electricity prices in the EU and G7 countries including and excluding taxes

5.5.1 In 2001 UK prices including taxes were fourth lowest in the EU out of nine countries and eighth lowest excluding taxes. Comparative data for the G7 countries is only available for the US excluding taxes.

5.5.2 In 2001, average UK domestic electricity prices, including taxes, were 7.2 per cent lower than the EU and G7 median. UK domestic electricity prices (including taxes) have been below the EU average every year since 1982 and below the G7 countries average every year since 1983. UK prices were 30.9 per cent higher than prices in Finland, which had the lowest prices and 49.2 per cent lower than prices in Denmark, which had the highest prices.

5.5.3 Between 2000 and 2001 UK domestic electricity prices, including taxes, fell by 1 per cent. Prices in Spain and Ireland also decreased, by 4.6 per cent and 4.2 per cent respectively. The largest increase was in the Netherlands where prices rose by 26.7 per cent, mainly due to an 80 per cent increase in taxes, designed to encourage consumers to switch to more environmentally friendly sources of energy.

5.5.4 Between 2000 and 2001 UK domestic electricity prices, excluding taxes, fell by 0.9 per cent. Spain and Ireland had the largest decreases with prices falling 4.6 per cent and 4.2 per cent respectively. The US had the largest price increase of 3 per cent.

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5.6 Average domestic electricity prices in the EU by size of consumer

Chart 5.6.1 Estimated average domestic electricity prices for medium consumers in the EU as at 1 January 2003

Estimated average domestic electricity prices in the UK for medium consumers as at 1 January 2003 were the seventh lowest in the EU excluding taxes and were 8 per cent higher than the EU median. Estimated prices for medium consumers in the UK including taxes were the third lowest in the EU and were 16 per cent lower than the median price.

Notes: Estimated data for 1 January 2003 is only available for Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Spain, Sweden and the UK.

Medium consumers are defined as having an annual consumption of 3,500kWh per annum of which 1,300 kWh is at night

Source: Derived from Eurostat Statistics in Focus Electricity prices for EU households on 1 July 2002 and Energy Advice Ltd Electricity and Gas Price Comparisons: January 2003. The UK price is estimated by the DTI.

Background

Table 5.6.1: Average domestic electricity prices for small consumers in the EU

Table 5.6.2: Average domestic electricity prices for medium consumers in the EU

Table 5.6.3: Average domestic electricity prices for large consumers in the EU  

5.6.1 Domestic electricity prices as at 1 July 2002 are presented in Tables 5.6.1 to 5.6.3. In addition, estimated prices for medium consumers as at 1 January 2003 and 1 October 2002 are presented in Table 5.6.2. The methodology used in estimating the prices is set out in paragraphs A30 to A32 of the Technical Notes along with definitions of the size bands.

5.6.2 Estimated data for small consumers are not available. Data for 1 July 2002 indicates that the including tax price of electricity in the UK for small domestic consumers was the eighth lowest out of fourteen countries and was the joint median price. This ranking has been the same since 1 July 2001. The highest including taxes price was in Denmark, at 75 per cent higher than the UK price, whilst the lowest price was in Greece, at 50 per cent lower than the UK price.

5.6.3 As at 1 July 2002, small domestic consumers in the UK had the eleventh lowest prices excluding taxes out of fourteen countries and were 22.5 per cent higher than the EU median. The highest excluding taxes price was in Luxembourg, at 11 per cent higher than the UK price, whilst the lowest price was in Greece, at 52 per cent lower than the UK price.

Chart 5.6.2 Average domestic electricity prices⁽¹⁾ in the EU by size of consumers as at 1 July 2002

Notes: Where national prices are not available, data for the following cities have been used instead:
Austria: Vienna, France: Paris, Germany: Dusseldorf, Greece: Athens, Ireland: Dublin, Portugal: Lisbon, Spain: Madrid

(1)  Including taxes where not refunded 

Source: Derived from Eurostat Statistics in Focus Electricity prices for EU households on 1 July 2002

5.6.4 Estimated data as at 1 January 2003 for medium consumers indicates that the including taxes price for electricity in the UK was the third lowest out of ten countries and was 1.9 per cent lower than in January 2002. Prices also increased in Denmark, Finland, Germany, Italy, Spain and Sweden by 0.7 to 8.9 per cent. Prices decreased by 24.9 and 1.6 per cent in Austria and Belgium, whilst prices in France remained constant. The highest including taxes price was in Denmark at 117 per cent higher than the UK price, whilst the lowest prices were in Finland at 1.1 per cent lower than the UK price.

5.6.5 On an excluding tax basis, the estimated data for medium consumers as at 1 January 2003 indicates that the UK had the seventh lowest prices out of ten countries and was 2.2 per cent lower than in January 2002. This compares to price increases of between 0.8 and 8.2 per cent in Belgium, Denmark, Finland, Germany, Italy, Spain and Sweden, whilst prices decreased in Austria and Italy by 15.2 per cent. Prices in France remained constant. The highest excluding taxes price was in Italy at 47.8 per cent higher than the UK price, whilst the lowest prices were in Austria at 32.4 per cent lower than the UK price.

5.6.6 Estimated data for large electricity consumers is not available. Data for 1 July 2002 shows that the including tax price for the UK was the third lowest out of fourteen countries and was 18.8 per cent lower than the EU median. The highest including taxes price was in Denmark at 120 per cent higher than the UK price, whilst the lowest prices were in Greece at 24 per cent lower than the UK price.

5.6.7 As at 1 July 2002, large consumers in the UK had the ninth lowest prices excluding taxes out of fourteen countries and were 5.7 per cent higher than the EU median. The highest excluding taxes price was in Italy at 47 per cent higher than the UK price, whilst the lowest price was in Finland, at 38 per cent lower than the UK price.

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5.7 Average industrial gas prices, EU and G7

Chart 5.7.1 Average industrial gas prices(1) in 2001, EU and G7

In 2001 average UK industrial gas prices, including taxes where not refunded, were the second lowest in the EU out of seven countries and second lowest in the G7 out of four countries. Prices in the UK including taxes were 20.7 per cent lower than the EU and G7 median. Data for 2001 are not available for several countries.  The above analysis is based on the available countries data.

Notes: Data is not available for Austria, Belgium, Denmark, Germany, Italy, Luxembourg, Portugal, Sweden, and Japan.
The price for the US is including taxes as the tax components are not available separately.

Source: Derived from IEA Energy Prices and Taxes Q4 2002

Background

Table 5.71: Annual average industrial gas prices in the EU and G7 countries including and excluding taxes

5.7.1 Prices vary between countries for many reasons including differences in indigenous resources and market structures.

5.7.2 UK prices in 2001 were the second lowest in the EU both including and excluding taxes out of seven countries. This is an improvement from 1990 when the UK was seventh lowest both including and excluding taxes.

5.7.3 In 2001, average UK industrial gas prices, including taxes, were 20.7 per cent lower than the EU and G7 median. UK prices were 10.7 per cent higher than prices in Finland. The highest prices were in Greece, with the UK price being 45.8 per cent lower.

5.7.4 UK prices including taxes were the second lowest in the G7 out of 4 countries, with only Canada having lower prices, mainly due to its rich indigenous supply of resources. This is an improvement from 1990 when the UK had the fifth and third lowest prices for including and excluding taxes prices respectively.

5.7.5 Prices in the UK including taxes have risen by 39.7 per cent between 2000 and 2001 while prices excluding taxes have risen by 33.5 per cent. The difference between these price movements is due to the Climate Change Levy which came into effect in April 2001. The large price increases in the UK are due to the increased cost of gas in 2000 only feeding through to prices in 2001. Other EU countries saw significant price rises during the 1999-2000 period.

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5.8 Average industrial gas prices in the EU by size of consumer

Chart 5.8.1 Estimated average industrial gas prices for medium consumers in the EU as at 1 January 2003

As at 1 January 2003 estimated average industrial gas prices in the UK for medium consumers were the second lowest in the EU excluding taxes and were 10.5 per cent lower than the EU median. Estimated prices for medium consumers in the UK as at 1 January 2003 were the second lowest including taxes and were 10.2 per cent below the median price.

Notes: Estimated data for 1 January 2003 is only available for Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Spain, Sweden and the UK . 
Medium consumers are defined as having an annual consumption of 11.63GWh.

Source: Derived from Eurostat Statistics in Focus Electricity prices for EU households on 1 July 2002 and Energy Advice Ltd Electricity and Gas Price Comparisons: January 2003.

Background

Table 5.8.1: Average industrial gas prices for small consumers in the EU

Table 5.8.2: Average industrial gas prices for medium consumers in the EU

Table 5.8.3: Average industrial gas prices for large consumers in the EU

5.8.1 Industrial gas prices as at 1 July 2002 are presented in Tables 5.8.1 to 5.8.3. Estimated prices as at 1 October and 1 January 2003 are presented as well. The methodology used in estimating the prices is set out in paragraphs A30 to A32 of the Technical Notes along with definitions of the size bands.

5.8.2 For most other EU countries prices rose sharply between January 2000 and July 2000, reflecting increases in the international wholesale price, however the UK did not see this sharp price rise until July 2001.

5.8.3 Estimated data as at 1st January 2003 indicates that the including tax price of gas in the UK for small consumers was the second lowest out of nine countries and was 21.2 per cent lower than the EU median. On an excluding tax basis, the UK had the third lowest price which was 17.7 per cent lower than the EU median. The highest prices both including and excluding taxes, were in Finland at 53 and 52 per cent respectively above the UK price. The lowest prices, both including and excluding taxes, were in Spain, at 12 per cent and 7 per cent respectively below the UK price. Between January 2002 and January 2003 the UK price, both including and excluding taxes, fell by 6 and 4 per cent respectively. Most other countries where data is available saw prices excluding taxes rise, ranging from 2.7 per cent in Austria to 8 per cent in Spain. Denmark had the largest price rise including tax of 9.9 per cent.

Chart 5.8.2 Average industrial gas prices⁽¹⁾ in the EU by size of consumer as at 1 July 2002

Notes: Where national prices are not available, data for the following cities have been used instead:

Austria: Vienna, France: Paris, Germany: Dusseldorf, Ireland: Dublin, Italy: Milan, Luxembourg: Luxembourg City, Portugal: Lisbon, Spain: Madrid: 

(1)  Including taxes where not refunded 

Source: Derived from Eurostat Statistics in Focus Gas prices for EU industry on 1 July 2002

5.8.4 Estimated data as at 1 January 2003 indicates that the price of gas in the UK for medium consumers including taxes was the second lowest out of ten countries. The UK price decreased between January 2002 and January 2003 falling by 7.1 per cent over the period. In contrast, the including tax price in Denmark increased by 15.4 per cent whilst prices in Italy fell by 9.0 per cent. Sweden had the highest price including taxes at 90.8 per cent higher than the UK price. The lowest prices including taxes was in Spain at 12.6 per cent below the UK price.

5.8.5 Estimated data as at 1 January 2003 indicates that the price of gas in the UK for medium consumers excluding taxes was the second lowest out of ten countries. The excluding tax price fell by 4.6 per cent from January 2002. This compares to an increase in Germany of 12.3 per cent. The highest excluding taxes prices were in Finland, Germany and Sweden at 30 per cent above the UK price. The lowest prices excluding taxes were in Spain at 7.2 per cent below the UK price.

5.8.6 Estimated data for large consumers as at 1 January 2003 indicates that the UK price of gas including taxes was the second lowest out of seven countries. Prices in the UK including taxes decreased by 6.8 per cent between January 2002 and January 2003. The UK was the only country to show a decrease based on the available data. In comparison prices in Denmark increased by 17.5 per cent. Germany had the highest price at 29.9 per cent above the UK.

5.8.7 The UK price excluding tax was the third lowest out of seven countries and decreased by 6.2 per cent over the period. Most other countries had excluding tax prices increase by 3.3 to 8.9 per cent. The highest prices excluding taxes were in Germany, at 8.5 per cent higher than the UK price. The lowest prices, both including and excluding taxes, were in Spain, at 6.7 per cent and 4.6 per cent below the UK price respectively.

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5.9 Average annual domestic gas prices, EU and G7

Chart 5.9.1 Average domestic gas prices (including taxes) in 2001, EU and G7

In 2001 average UK domestic gas prices, including taxes where not refunded, were the second lowest in the EU out of ten countries and second lowest in the G7 out of four countries. Prices in the UK including taxes were 20.6 per cent lower than the EU and G7 median. Data for 2001 are not available for several countries.  The above analysis is based on the available countries data.

Notes: Data for Belgium, Germany, Italy, Portugal, Sweden and Japan are not available.
The price for the US and Canada are including taxes as the tax components are not available separately.
Prices for Finland are for district heating not central heating, as is the case in other countries.

Source: Derived from IEA Energy Prices and Taxes Q4 2002

Background

Table 5.9.1: Annual average domestic gas prices in the EU and G7 countries including and excluding taxes

5.9.1 In 2001, average UK domestic gas prices, including taxes, were 20.6 per cent lower than the EU and G7 median. UK prices were 30.5 per cent higher than prices in Finland, which had the lowest prices and 59.6 per cent lower than prices in Denmark, which had the highest prices. The low gas prices in Finland are due to the use of district heating schemes rather than household central heating schemes as is the case in other countries.

5.9.2 UK prices in 2001 were the second lowest including taxes in the EU, and fourth lowest excluding taxes out of ten countries. This is an improvement from 1999 when UK prices were the third lowest including taxes and eight lowest excluding taxes.

5.9.3 UK prices in 2001, including taxes, were the second lowest out of four G7 countries after Canada. There is insufficient data available for a comparison of prices excluding taxes.

5.9.4 Between 2000 and 2001, UK domestic gas prices, including taxes, increased by 2.7 per cent. Only Denmark, calculated using prices in national currencies, experienced a decrease of 0.8 per cent and the largest increases were 32.5 and 47.3 per cent in the Netherlands and Canada respectively.

5.9.5 Between 2000 and 2001, UK domestic gas prices, excluding taxes also rose by 2.7 per cent. The only decrease in prices excluding taxes was in Denmark by 13.5 per cent. Based on the available data Finland had the largest increase over this period with a price rise of 49.3 per cent, while Greece and Luxembourg had increases of just over 12 per cent.

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5.10 Average domestic gas prices in the EU by size of consumer

Chart 5.10.1 Estimated average domestic gas prices for medium consumers in the EU as at 1 January 2003

Estimated average domestic gas prices in the UK for medium consumers as at 1 January 2003 were the lowest in the EU excluding taxes and were 24 per cent lower than the median. The UK price including taxes was the lowest in the EU and was 41 per cent lower than the median price.

Notes: Estimated data for 1 January 2003 is only available for Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Spain, Sweden and the UK.

Medium consumers are defined as having an annual consumption of 23,260kWh per annum.

Source: Derived from Eurostat Statistics in Focus Gas prices for EU households on 

1 July 2002 and Energy Advice Ltd Electricity and Gas Price Comparisons: January 2003

Background

Table 5.10.1: Average domestic gas prices for small consumers in the EU

Table 5.10.2: Average domestic gas prices for medium consumers in the EU

Table 5.10.3: Average domestic gas prices for large consumers in the EU  

5.10.1 Domestic gas prices as at 1 July 2002 are presented in Tables 5.10.1 to 5.10.3. In addition, estimated prices for medium consumers at 1 Jan 2003 and 1 October 2002 are presented in Table 5.10.2. The methodology used in estimating the prices is set out in paragraphs A30 to A32 of the Technical Notes along with definitions of the size bands.

5.10.2 Estimated data for small gas consumers is not available. The data for 1 July 2002 indicates that the including tax price of gas in the UK for small domestic consumers was the second lowest out of eleven countries and was 31.9 per cent lower than the EU median. The highest including taxes price was in Sweden at 95 per cent higher than the UK price, whilst the lowest price was in the Netherlands, at 5 per cent below the UK price. From January 2001 a fixed refund of 96 € (excluding VAT) per annum is given per connection in the Netherlands and this has contributed to its lower including taxes prices.

5.10.3 As at 1 July 2002, small domestic consumers in the UK had the second lowest prices excluding taxes out of eleven countries and was 17.5 per cent lower than the EU median. The highest excluding taxes price was in Germany at 62 per cent higher than the UK price, whilst Denmark had the lowest prices which were 16 per cent below the UK price.

Chart 5.10.2 Average domestic gas prices(1) in the EU by size of consumers as at 1 July 2002 

Notes: Where national prices are not available, data for the following cities have been used instead:

Austria: Vienna, France: Paris, Germany: Dusseldorf, Ireland: Dublin, Italy: Milan, Luxembourg: Luxembourg City, Netherlands: Rotterdam, Spain: Madrid: 

(1)  Including taxes where not refunded 

Source: Derived from Eurostat Statistics in Focus Gas prices for EU households on 1 July 2002

5.10.4 Estimated data as at 1 January 2003 indicates that the including taxes price for gas in the UK for medium consumers was the lowest out of ten countries. The price including taxes was 40.6 per cent lower than the EU median. Compared to 1 January 2002 the UK price including taxes was 5.2 per cent higher in January 2003. This compares to price increases of 2.6 to 5.7 per cent for Belgium, Denmark, the Netherlands, Germany and Sweden, whilst prices in Austria, France, Italy and Spain fell by between 1.5 and 11 per cent. The highest prices including taxes were in Denmark and Sweden at 169 and 158 per cent higher than the UK price respectively.

5.10.5 On an excluding tax basis, the estimated data as at 1 January 2003 indicates that the UK price of gas for medium consumers was the lowest out of ten countries and was 24.4 per cent lower than the median. Compared to January 2002, the price in the UK as at 1 January 2003 was 5.4 per cent higher. This compares to price increases of 0.1 to 4.1 per cent for Belgium, Denmark, France, Germany, Italy, the Netherlands and Spain, whilst prices in Austria and Sweden fell by between 0.1 and 0.5 per cent. The highest prices excluding taxes were in Spain and Germany at 53 and 48 per cent higher respectively than the UK price.

5.10.6 Estimated data for large gas consumers is not available. Data for 1 July 2002 indicates that the including tax price in the UK was the lowest out of ten countries and was 38.4 per cent lower than the EU median. The UK has maintained this ranking since July 2000, with the price being at least 20 per cent lower than the EU median since January 1998. The highest prices including taxes were in Denmark and Sweden at 174 and 152 per cent higher, respectively, than the UK price.

5.10.7 As at 1 July 2002, large consumers in the UK had the lowest prices excluding taxes out of ten countries and were 20.9 per cent lower than the EU median. The highest excluding taxes price was in Germany at 46 per cent higher than the UK price.

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Annex A - Technical Notes

Table 2.1.1

A1.The source of the prices in this table is the Retail Prices Index (RPI), published by the Office for National Statistics.  The fuel components within the RPI are published, together with the all items RPI.  Table A1 below gives the weights within the total index, in parts per 1,000, of the fuel components.  RPI is calculated using prices collected on a day near the middle of the month.

Table A1: Retail prices index, fuel component weights

The following notes apply to Table 2.1.1:

A2. Coal and smokeless fuel (coal and solid fuels) - Retail prices of one standard grade of household coal and of the boiler/room heater grade of smokeless fuel sold by the retailer, obtained from local retailers in up to 146 areas throughout the United Kingdom.

A3. Gas and electricity - The indices are calculated using published tariff information from British Gas (and since April 1996 other suppliers), the Public Electricity Supply Companies and Northern Ireland Electricity (NIE).  When prices change in an area (including discounts and lump sum rebates), an index is re-calculated for a selection of the tariffs in use in that area at typical levels of consumption at each tariff.  Electricity area indices are weighted together using the total receipts of each Public Electricity Supply Company and NIE from their sales to domestic consumers under each tariff. Gas companies are weighted by customer numbers, which currently gives most weight to British Gas.  Both indices are calculated using mainly credit tariffs only.

A4. Heating oils - This comprises bottled gas and paraffin until January 1986, and domestic heating oils.  Prices of heating oil are provided by the main suppliers.

A5. Petrol and oil  -  Retail prices of the different grades of motor spirit and engine oil are obtained from garages in more than 180 areas throughout the United Kingdom.

Tables 2.2.1 to 2.3.3

A6. Tables 2.2.1 and 2.3.1 show representative gas and electricity bills by payment type in each of the 15 Public Electricity Supply (PES) areas in the UK and 12 gas Local Distribution Zones (LDZ) in Great Britain. The unit cost represents the total cost to the consumer per unit consumed and is calculated by dividing the bill shown by the number of units consumed (18,000 kWh for gas, 3,300 kWh for electricity). The electricity PES areas and gas LDZ associated with each of the towns and cities are shown in Table A2:

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Table A2: Towns and cities in Table 9.5 by LDZ and PES area

A7. Bills and unit costs are based on published prices and include standing charges. No allowances are made for introductory offers or non-cash benefits that may be available from new suppliers. Both electricity and gas bills and costs reflect the prices of all suppliers. This basis is used for all the domestic bills and cost data used in Tables 2.2.1 to 2.3.3. The bills shown relate to the total bill including VAT in cash terms received during the calendar year, for the tariff type shown, including all tariff changes and rebates. Averages are weighted by the number of domestic customers. For electricity an annual consumption of 3,300 kWh is used whilst the equivalent figure for gas is 18,000 kWh. 

A8. The weighted average all supplier gas bills are based on equivalent tariffs of British Gas and other supply companies. As the estimate (like all the bills in the table) is based on bills received during the calendar year, that is consumption in Q4 of year X-1 and Q1 - Q3 of year X, customers of new gas suppliers will have received some of their gas in a year from British Gas prior to switching. This, coupled with the fact that British Gas in 2000 still supplied around 70 per cent of the domestic market, means that especially in the early years of competition the all supplier average is not substantially lower than the British Gas figure, despite the large savings available, as shown by the average non British Gas bill. 

A9. The footnotes to Table 2.2.2 include data for ‘Economy 7’ tariffs, where a lower unit cost is applied to off-peak (night) consumption. For the total consumption of 6,600, off-peak consumption has been taken as 3,600.The ‘white meter’ tariffs are used to calculate values in Scotland, where ‘Economy 7’ tariffs are not available.

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Table 2.6.1

A10. Household final consumption expenditure comprises household expenditure in the United Kingdom on the fuels specified and fuel purchases by foreign tourists. It excludes expenditure on fuels by businesses. VAT was levied on domestic fuels at 8 per cent in April 1994, reduced to 5 per cent in September 1997, and is included in the table from 1994 onwards. For coal, coke and petroleum products it was assumed that all consumers paid VAT from the date of its introduction. For electricity and gas an estimate was made that 5 per cent of electricity sales and 4 per cent of gas sales were covered by customers pre-paying their bills to avoid VAT in 1994 and 1995. Figures for total consumers’ expenditure are also shown for comparison. Due to the reclassification of Household Expenditure to conform to the European Systems of Accounts 1995 (ESA 95), COICOP (Classification of Individual Consumption by Purpose) has been implemented. This has led to some headings being rearranged.

The following notes apply to Table 2.6.1:

A11. Solid Fuels ­ Household final consumption expenditure on these fuels is based on estimates of inland sales of solid fuels to domestic consumers. Expenditure in Northern Ireland is estimated based on values of colliery despatches of house coal to Northern Ireland. 

A12. Gas - Personal consumption in the United Kingdom is taken as sales to domestic premises. Estimates of the quantity and value of liquid gases purchased by domestic consumers are provided by the petroleum industry. The average price used is the average revenue per kWh for public supply sales of gas to domestic consumers.

A13. Electricity - Sales from the public electricity supply system to domestic consumers in the United Kingdom plus estimates of the domestic element included in sales to dual use premises. Sales are valued at the average revenue per unit for electricity sold to domestic consumers, which takes into account discounts and lump sum rebates. 

A14. Liquid fuels (domestic heating and lighting oil) - For fuel oils and heating oils, information is available from the petroleum industry on quantities delivered to domestic consumers. The figures for domestic consumption for these are then valued using monthly prices collected by the department from oil companies.

A15. Vehicle fuels and lubricants (petrol, diesel, LPG, oil and lubricants, brake and other fluids, coolants) ­ Estimates of the quantity and value of lubricating oil purchased by domestic customers are provided by the petroleum industry. For motor spirit and diesel, estimates of business purchases of the fuels are made and deducted from total deliveries to arrive at purchases by domestic consumers. The figures for domestic consumption for these are then valued using monthly prices collected by the department from oil companies.


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Table 2.6.2

A16.    Figures for Table 2.6.2 are taken from the Family Expenditure Survey (FES) conducted by the ONS.  The figures are estimates based upon a representative sample of households.  The averages in the table have been calculated on the basis of consuming households, i.e. only those households who consumed the particular fuel in question are included in the calculation of the average expenditure.  These estimates therefore differ from those published by the ONS in the report, "Family Spending", where the total of all households is used to calculate average fuel expenditure.  After the publication of data for 1993 the FES moved to a financial year basis meaning 2000/01 is the latest year for which information is available.  The data presented on expenditure on fuel as a proportion of total expenditure in table 2.6.2 are based on all households, not just those consuming the fuel or other commodity, for ease of comparison.

Tables 3.1.1 to 3.1.4

A17. Prices are derived from information collected via the Quarterly Fuels Inquiry on fuel purchases from a panel of about 1,200 establishments within manufacturing industry (which excludes electricity generation).  The panel consists of companies purchasing fuels in small and large quantities.  To maximise the coverage of each fuel type and minimise the burden on business, larger users are surveyed proportionally more than smaller users.

A18. For each size of consumer the average price  for a fuel (exclusive of VAT) is calculated by dividing the total quantity of purchases into their total value. The "all consumers-average" price uses base weighting and weights the prices for each size band according to purchases by businesses in the size band recorded in the 1984 Purchases Inquiry.  (This is a large scale survey conducted every 5 years until 1989, and conducted annually for a rotating selection of industries from 1994 to 1999.  From 1999 the inquiry has once again covered all industries, providing information on the purchases of materials and fuels by the whole of UK industry.)  The weights will be reviewed when comprehensive up-to-date purchases data are available.  The size bands are defined, for each fuel individually, according to the approximate range of annual purchases covered.  (See Table A3 below).

A19.As described above the prices given are representative market prices.  This means trades that, because of their size or dominance of total consumption would produce an unrepresentative price, are excluded.  For example, coal and coke purchased by the iron and steel sector are excluded as is gas purchased for electricity generation.

A20. For some fuels the relative size in volume terms of the largest users can have the effect of moving the weighted average more towards the large user price.  This is true for gas where because of the growth in consumption the weights provided by the 1984 purchases survey may be out of date.  Therefore, for some fuels (e.g. gas and gas oil) the median price (the price at which 50 per cent of the prices paid are higher and 50 per cent lower)  may be another useful guide to average prices.

A21. There is no sub-division into size bands of the prices for medium fuel oil, liquefied petroleum gases and hard coke owing to the small number of sites purchasing each of these fuels.  The small sample sizes reflect the small overall consumption, relative to the major fuels covered, which means that although the prices are still representative, they can be subject to more sample effects than the other fuels (e.g.  if a relatively large purchaser switches fuel).

A22. To enable coal prices to be calculated in common units, companies record the calorific value of the coal they purchase.  Conversion factors for fuel oil (both heavy and medium), gas oil, liquefied petroleum gas and hard coke are given in Annex B.

A23. The 10 per cent and 90 per cent deciles and the median price for each fuel are presented in addition to the prices for each size band.  The 10 per cent decile is the point within the complete range of prices below which the lowest 10 per cent of those prices fall.  Similarly the 90 per cent decile is the point above which the highest 10 per cent of the prices occur.  Thus, these values give some indication of the spread of prices paid by purchasers.  The deciles and the median are calculated by giving equal "weight" to each purchaser,  but are scaled to represent the mix of fuel users by size in the industrial population that the panel represents.

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Table A3: Range of annual purchases for the Quarterly Fuels Inquiry
	Large		Of which:		Medium		Small
			Extra large	Moderately large
Fuel	Greater than		Greater than					Less than
Coal (tonnes)	7,600	..		..	760 to 7,600				760
Heavy fuel oil (tonnes)	4,900	15,000		4,900 to 15,000	490 to 4,900				490
Gas oil (tonnes)	175	..		..	35 to 175				35
Electricity (thousand kWh)	8,800	150,000		8,800 to 150,000	880 to 8,800				880
Gas(1) (thousand kWh)	8,800	..		..	1,500 to 8,800				1,500

 (1) Respondents purchasing more than one type of supply (tariff, firm contract and interruptible contract) are treated as separate entities in respect of each type of supply.

Table 3.2.1

A24 The prices for fuels used in electricity generation are collected via a quarterly inquiry of electricity generators in the United Kingdom. The data reported are the value and volume of fuel purchased during the quarter and may not always reflect the fuel actually used (i.e. there can be stocking and destocking especially of coal). The prices reported are typically for long-term contracts, with price escalator factors, some of which may have been entered into some time ago. As such the prices can be higher than those paid by large industrial users who typically negotiate contracts each year.

A25 The gas beach price series is calculated as follows:

where the UKCS sales value and volume data are derived from the DTI’s quarterly statistical inquiry into oil and gas extraction (PQ1100).  Returns from the inquiry give the value and volume of gas sold by each licensee from a particular field (or group of fields).  Data from the inquiry on sales and expenditure by licensees are covered and further explained in Annex C of the Digest of UK Energy Statistics.  Trade data are supplied by Customs and Excise and published in the Digest in Chapter 8, Table 8.1 and in Energy Trends.

A26.The gas levy applied to gas purchased under certain contracts originally entered into before July 1975.  The cost of gas under these pre-July 1975 contracts had historically been substantially less than the prevailing market price.  Gas sold under these contracts was not subject to Petroleum Revenue Tax (PRT) because the contracts were classified as "tax-exempt" when PRT was introduced in 1975.  Instead, under the Gas Levy Act 1981, the purchaser of gas subject to the relevant contracts had to pay a levy on every therm of such gas that they purchased.  The purpose of the gas levy was to capture for the Exchequer the bulk of the economic rent which would otherwise accrue to the purchaser from purchasing this gas at below market prices.  However, current and expected future gas market prices are now below the average cost of this gas (even before adding the cost of the levy).  The gas levy was abolished from 1 April 1998.

Tables 4.1.1 to 4.1.3 

A27. The data published are national average prices calculated from prices supplied by all major motor fuel marketing companies. Prior to 1977 price data were collated from a variety of sources mainly the published scheduled wholesale prices of the oil companies to which retailers margins were added. The results of various consumers’ surveys were also taken into consideration in arriving at a typical price. Users of the table should bear in mind that, because of the multiplicity of petroleum marketing companies operating in the United Kingdom and the diversity of their pricing policies, prices differ from dealer to dealer and from area at area. From January 1995 sales by super/hyper markets, which now make up around 26 per cent of the retail petrol market are included in the price estimates

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Tables 5.1.1 to 5.10.1

A28. International comparisons are based on data published by international organisations and by Energy Advice Ltd, a private sector consultant (telephone: 020 8393 4230). Motor fuel prices are taken from the European Commission’s ‘Oil Bulletin’ that contains weekly and mid-month data. Mid-month data is generally more representative in that it covers a greater proportion of sales. Again collection methodologies vary between countries, but these tend to be more consistent than with other fuels.

A29. For the analysis of annual electricity and gas prices (Tables 5.3.1, 5.5.1, 5.7.1 and 5.9.1), the data used are collated and published by the International Energy Agency in ‘Energy Prices and Taxes’. Individual countries supply data to the IEA, so methodology can vary from country to country.

A30. The data presented in Sections 5.4, 5.6, 5.8 and 5.10 are derived from Eurostat’s Statistics in Focus series and updated with estimates from Energy Advice Ltd. The size of consumers are defined as follows:

A31.  Eurostat publishes data on gas and electricity prices six months after the reference year. The data as at 1 October 2002 has been estimated by calculating the percentage price movement in national currencies between 1 July 2002 and 1 October 2002 using data from Energy Advice Ltd. This percentage change has then been applied to the appropriate Eurostat data as at 1 July 2002 and then converted to sterling using exchange rates as at 1 October 2002. The 1 January 2003 estimated prices have been calculated in a similar manner. The Eurostat data is mainly for selected cities in the EU, although some national prices are given as well. Where national data are not available, data for cities have been used instead. These cities are listed in the notes to the tables. The Energy Advice data are for countries rather than for cities.

A32.  It is important when comparing international prices to keep in mind the impact of exchange rates (as the data are presented in a common pound sterling basis, the changing level of the pound will cause some changes in relative prices) and inflation rates in individual countries. The relative strength of the pound in 1997, 1998 and 1999 (e.g. sterling appreciated by 21 per cent against the German Mark between 1996 and 1999) to some extent will have had an adverse effect on comparisons of UK data.

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Annex B ­ Calorific Values and Conversion Factors

B1: Estimated average gross calorific values of fuels 2001

(1) Applicable to UK consumption - based on calorific value for home produced coal plus imports and, for "All consumers" net of exports.

(2) Based on 50 per cent moisture content.

(3) Average figure covering a range of possible feedstock.

(4) Average figure based on survey returns.

(5) The gross calorific value of natural gas can also be expressed as 10.973 kWh per cubic metre. This value represents the average calorific value seen for gas when extracted. At this point it contains not just methane, but also some other hydrocarbon gases (ethane, butane, propane). These gases are removed before the gas enters the National Transmission System for sale to final consumers. As such, this calorific value will differ from that readers will see quoted on their gas bills.

Note: The above estimated average gross calorific values apply only to the year 2001. For calorific values of fuels in earlier years see Table B2. The calorific values for coal other than imported coal are based on estimates provided by the main coal producers. The calorific values for petroleum products have been calculated using the method described in Chapter 1, paragraph 1.48 of the Digest of UK Energy Statistics. The calorific values for coke oven gas and blast furnace gas are provided by the Iron and Steel Statistics Bureau (ISSB).

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B2: Estimated average gross calorific values of fuels1970, 1980, 1990 and 1997 to 2001

                                                                                                                                          GJ per tonne (gross)

(1) Weighted averages.

(2) Home produced coal only.

(3) Mechanical engineering and metal products, electrical and instrument engineering and vehicle

manufacture.

(4) Includes construction.

(5) Since 1995 the source of these figures has been the ISSB.
(6) Orimulsion use ceased in 1997.

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B3: Standard conversion factors

1 tonne of oil equivalent (toe) = 10⁷ kilocalories
= 396.83 therms
= 41.868 GJ
= 11,630 kWh
1 therm = 100,000 British thermal units (Btu)

The following prefixes are used for multiples of joules, watts and watt hours:

LENGTH

1 mile = 1.6093 kilometres

1 kilometre (km) = 0.62137 miles

TEMPERATURE

1 scale degree Celsius (C) = 1.8 scale degrees Fahrenheit (F)
For conversion of temperatures: °C = 5/9 (°F - 32); °F = 9/5 °C + 32

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B4: Average conversion factors for petroleum 2001

Note: The above conversion factors, which for refined products have been compiled by the UK Petroleum Industry Association, apply to the year 2001, and are only approximate for other years.

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Annex C - Effective rates of duty on principal hydrocarbon oils, 1964 to 2001⁽¹⁾

                                                                                                                                                    Pence per litre

(1) Duty rates remain the same unless otherwise stated.

(2) These fuels became liable to Value Added Tax as follows:-

(i) 10% with effect from 1 April 1974

(ii) 8% with effect from 29 July 1974

(iii) For motor spirit 25% with effect from 18 November 1974

(iv) For motor spirit 12.5% with effect from 12 April 1976

(v) 15% with effect from 18 June 1979

(vi) 17.5% with effect from 1 April 1991

(3) With effect from 14 March 1989 until 20 March 1990, the rate of duty for 2-star and 3-star leaded motor spirit was 21.220 pence per litre.

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Annex C - Effective rates of duty on principal hydrocarbon oils, 1964 to 2001⁽¹⁾ (continued)
                                                                                                                                                   

                                                                                                                                                    Pence per litre

(4) With the separate duty rate abolished, duty on these fuels is now charged at the rate appropriate to unleaded petrol or ultra low sulphur petrol, dependent upon the sulphur and aromatic content of the fuel.

(5) For industrial and commercial consumers these fuels became liable to the standard rate of Value Added Tax on 1 July 1990 (at 15% to 31 March 1991 and at 17.5% from 1 April 1991), recoverable by the majority of such consumers. These fuels attracted Value Added Tax for domestic consumers from 1 April 1994 at an initial rate of 8%. This was reduced to 5% from 1 September 1997.

(6) AVTUR (aviation turbine fuel) attracted the gas oil rate until 18 March 1986 after which it was zero-rated.

(7) From 29 November 1994 this duty is priced in pence per kilogram as the relative calorific values of the different types of road fuel gases are very similar when related to mass (kilogram).

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Annex D - Further Sources of Information

D1 Energy prices

Energy Prices (annual); Statistical Office of the European Communities Summarises price information published in the European Commissions Weekly Oil Bulletin, and half-yearly Statistics in Focus on Gas Prices and Electricity Prices

Energy Prices and Taxes (quarterly); OECD International Energy Agency

Electricity prices; Eurostat (annual)                                                          

Gas prices; Eurostat, (annual)

D2 Fuel poverty

D3 Department of Trade and Industry publications on energy

Unless otherwise stated, all titles are available from(Available from SECIIS 5/6, Department of Trade and Industry, Bay 1108, 1 Victoria Street, London SW1H 0ET, tel. 020-7215 2697/2698

Energy Trends

Contains monthly and quarterly data on production and consumption of overall energy and of the individual fuels in the United Kingdom.  Also includes data on foreign trade in fuels.

Digest of UK Energy Statistics 2002

Available from The Stationery Office and can be ordered through Government Bookshops

Contains quarterly and annual data on production and consumption of overall energy and of the individual fuels in the United Kingdom.  Also includes a commentary covering all the major aspects of energy and gives a comprehensive picture of energy production and use over the last five years with key series taken back to 1970.

White Paper: Our energy future - creating a low carbon economy

Available from The Stationery Office and at http://www.dti.gov.uk/energy/whitepaper/index.shtml#wp

UK Energy Sector Indicators

This is a set of indicators grouped into 12 sections covering different aspects of the energy sector. The content is designed to show the extent to which secure, diverse and sustainable supplies of energy to UK Businesses and consumers at competitive prices are ensured. 
www.dti.gov.uk/energy/energy_indicators/

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Energy - its impact on the environment and society

Also available on the internet at www.dti.gov.uk/energy/environment/energy_impact/.

This publication outlines the environmental and social impacts of energy production and use, including the interaction between economic, social and environmental trends. It includes information on emissions and other environmental consequences from energy production and supply, and the social impacts of domestic competition, service quality issues and fuel poverty.

Energy Consumption in the UK

Also available on the internet at www.dti.gov.uk/energy/inform/energy_consumption/.

This brings together statistics from a variety of sources to produce a comprehensive review of energy consumption in the UK since the 1970s. This booklet describes the key trends in energy consumption in the UK since 1970 with a particular focus on trends since 1990. It includes an analysis of the factors driving the changes in energy consumption, the impact of increasing activity, increased efficiency, and structural change in the economy, while detailed tables can be found on the internet.  The information is presented in five sections covering firstly overall energy consumption, then energy consumption in the transport, domestic, industrial and service sectors.

Energy Report 2001

Available from The Stationery Office and can be ordered through Government Bookshops

This is the eighth annual Energy Report, the purpose of which is to help competitive markets develop by setting out the key elements of energy policy and the main driving forces.

Development of the Oil and Gas Resources of the United Kingdom 2001

Available from The Stationery Office and can be ordered through Government Bookshops

This is an annual report to parliament by Secretary of State for Trade and Industry on the activities to search for and exploit oil and gas in the UK sector of the Continental Shelf.  Contains information about the upstream industry including information on the licensing and fiscal regimes governing it, production and remaining reserve levels.

Industrial Energy Markets: Energy markets in UK manufacturing industry 1973 to 1993 - Energy Paper 64  

Available from The Stationery Office and can be ordered through Government Bookshops

Using tables of data drawn from the 1989 Purchases Inquiry conducted by the Office for National Statistics, the report, which updates one produced in 1989, sets out the implications for the trends in industrial energy consumption over the period from 1973 to 1993. 

Energy Consumption in the UK:-   Energy Paper 66

Available from The Stationery Office and can be ordered through Government Bookshops

A statistical review of delivered and primary energy consumption by sub-sector, end use and the factors effecting change.

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Energy Projections for the UK:- Energy Paper 68

Available from The Stationery Office and can be ordered through Government Bookshops

This paper presents the results of an exercise to update the Government’s projections of future UK energy demand and related emissions of carbon and sulphur dioxides to 2020. It builds on work issued as a working paper in March 2000 and its projections underpin the Climate Change Programme launched by the DETR in November 2000. The paper contributes to policy development and assessment of the UK’s efforts to meet its national and international greenhouse gases targets.

Social Effects of Energy Liberalisation: The UK Experience

This paper presents the high degree of liberalisation which exists in all sectors of the UK energy industry.  The UK is seen as being at the forefront of a world-wide movement on the process of privatisation through to liberalisation.

Energy Liberalisation Indicators in Europe: A preliminary report of a study carried out by OXERA for the Governments of the UK and the Netherlands.

This paper presents some preliminary results from a study carried out by OXERA. The study develops a set of indicators, within a hierarchical structure, for monitoring the development of competition in gas and electricity markets across Europe. This summary paper briefly describes the methodology being proposed and presents some preliminary results for a subset of European countries including the UK and Netherlands. The paper concentrates on the electricity market, where data are more readily available, but also includes gas indicators for the UK and Netherlands.

Energy Liberalisation Indicators in Europe: A consultation paper based on a study carried out by OXERA for the Governments of the UK and the Netherlands.

This develops a set of indicators, within a hierarchical structure, for monitoring the development of competition in gas and electricity markets across Europe.  This consultation paper sets out the methodology used and presents results for a subset of European countries including the UK and the Netherlands.  The methodology has been developed by OXERA following discussions with the Governments of the UK and the Netherlands.  The exact details of the methodology, and the results do not necessarily represent the views of the two Governments.  They hope that it will provide a basis for the commission, and all Member states, to construct a set of indicators that can be used to monitor the development of competition across Europe.

Social, Environmental and Security of Supply Policies in a Competitive Energy Market: A Review of Delivery Mechanisms in the United Kingdom, Summary Paper

This paper outlines the UK experience so far in using competitive energy markets to deliver social, environmental and security of supply policies.  It highlights the benefits that have emerged from this approach and sets out the instruments the Government has used to enhance policy delivery.  It is intended to promote debate with other Member States about their own experiences and the mechanisms they have developed to deliver Government policy in these areas.

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D4 Energy related websites

The DTI website can be found at http://www.dti.gov.uk, the energy information and statistics website is at http://www.dti.gov.uk/energy

Other Government websites

Other useful energy related websites

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Explanatory Notes

NOTES TO TABLES

• Figures for the latest periods and the corresponding averages or totals are provisional and are liable to subsequent revision.
• The figures have not been adjusted for temperature or seasonal factors except where noted. Due to rounding the sum of the constituent items may not equal the totals.
• Percentage changes relate to the corresponding period a year ago. They are calculated from unrounded figures but are shown only as (+) or (-) when the percentage change is very large.
• Monthly figures relate to four week periods except where otherwise indicated.
• All figures relate to the United Kingdom unless otherwise indicated.

SYMBOLS USED IN THE TABLES

.. not available.

- nil or less than half the final digit shown.

* five-week period.

p provisional.

r revised; where a column or row shows ‘r’ at the beginning, most, but not necessarily all, of the data have been revised.

e estimated; totals of which the figures form a constituent part are therefore partly estimated.

ABBREVIATIONS

GDP - Gross domestic product

UKCS - United Kingdom Continental Shelf

VAT - Value added tax

CONVERSION FACTORS

1 tonne of UK crude oil = 7.55 barrels

1 gallon (UK) = 4.54609 litres

1 kilowatt (kW) = 1,000 watts

1 megawatt (MW) = 1,000 kilowatts

1 gigawatt (GW) = 1,000 megawatts

1 terawatt (TW) = 1,000 gigawatts

All conversion of fuels from original units to units of energy is carried out on the basis of the gross calorific value of the fuel. More detailed information on conversion factors and calorific values is given in the Digest of UK Energy Statistics.

Climate Change Levy

The Climate Change Levy came into effect on 1 April 2001. This levy is designed to encourage businesses to reduce their energy consumption so as to reduce pollution. For information about the climate change levy please contact the HM Customs and Excise Climate Change Levy Help Desk on 0161 827 0332, or e-mail helpdesk.cc.@hmce.gov.uk.

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