What is the price of natural gas

Gas prices

Information on gas prices

Composition of gas prices

Similar to the prices for electricity, the prices for gas are made up of various factors. These are the following factors for natural gas prices:

  • Gas import costs
  • Gas supplier costs for gas purchases
  • value added tax
  • Natural gas tax
  • Proportional subsidy tax and concession tax
  • Grid usage, distribution costs and profit of the energy supplier

In contrast to electricity, the share of taxes and duties is relatively low at around 30 percent for natural gas. In contrast, the share of the costs for gas purchase, import and use of the network for the distribution of natural gas is around 70 percent.

Composition of gas prices, © picture: Bundesverband der Energie- und Wasserwirtschaft e.V.

Oil price peg

A special feature of gas prices is that they are linked to oil prices. This price coupling was agreed between the natural gas and oil industries in the 1960s. In this way, price fluctuations for natural gas should be reduced. This price stabilization was intended to create long-term planning security, especially for investments in the natural gas sector.

For price maintenance, the average oil price within a certain period was used as the starting point for the natural gas price. This average value was used with a time lag for a certain period as a reference value for natural gas prices. The individual time periods for the calculation could vary.

In the course of time, however, the oil price link became increasingly criticized. In spring 2010, the exclusive link between gas prices for end consumers and the oil price was declared inadmissible by the Federal Court of Justice. In addition, a special right of termination must always be granted in the event of price increases.

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Development of gas prices

For a long time, the oil price link ensured that the prices for natural gas rose continuously. With a time lag, the price of natural gas followed the price increases for crude oil. In contrast, price reductions were often only slowly or not fully passed on to end consumers.

However, these price increases did not correspond to the actual price increases for the production and import costs for natural gas. In this way, the price of natural gas for end users was ultimately significantly higher than the production and import costs for natural gas. The restriction of the oil price linkage of gas prices for end consumers gradually results in an independent price development for natural gas.

Development of gas prices in comparison, © Image: C.A.R.M.E.N. e.V.

Counter price increases

Despite the sometimes quite cheap natural gas prices, long-term increases in natural gas prices are to be expected. Natural gas is seen as a good alternative to oil in many areas. For example, to generate heat or as fuel for cars. The scarcer and therefore more expensive crude oil becomes, the greater the demand for natural gas is likely to become. And that usually drives up prices.

As an end user, it makes sense to ensure that the consumer devices, such as the heating boiler, are working as efficiently as possible. With new devices, care should be taken to ensure that they are as energy-efficient as possible. Replacing inefficient devices with more economical ones is often worthwhile.

In addition to increasing the efficiency of the consumer devices, switching to a cheaper provider can also be worthwhile. For some time now, more and more providers have been coming onto the market who buy their natural gas at short notice and thus at the current, favorable conditions. Many of these providers use this as a competitive advantage and offer their gas cheaply. A price comparison between the providers is worthwhile in most cases.

Change of provider in case of price increase

If your gas supplier increases the price, he is legally obliged to grant his customers a special right of termination. This special right of termination enables you to change providers at short notice. However, these deadlines are sometimes very short, depending on the provider. After this period, a change of provider is only possible within the contractually regulated deadlines. Especially those who otherwise have a long notice period should make a quick decision in these cases.

Even if speed is sometimes required if the special right of termination is to be used, termination should not be rushed under any circumstances. Before you cancel, you should find out whether there are cheaper providers for you. Only when you have found a cheaper provider should you really change providers.

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Tags:Gas, gas prices, gas price development