Lorien Energy Index, Q2 2012 Results

Lorien has released the Lorien Energy Index (LEI) data for the first six months of 2012; finishing Q2 at 4.28, down 2.7% from 4.40 in Q1, with an underlying upwards trend that has seen the LEI increase by 250% over six years.

The Lorien Energy Index (LEI) monitors the overall cost of energy for business users, and it enables companies of all sizes to make sense of their current energy use and look at ways they can make savings in the future, possibly through the use of energy efficient technologies, and making productive use of waste streams and other resources.

The preliminary findings for the 2nd quarter of 2012 are;
• Electricity prices fell 1.22%
• Gas prices fell 1.24%
• Gas Oil fell 4.82%

The underlying trend however is that over the last 12 months electricity has risen in price by 5.15% and gas has risen by 9.82%, whilst gas oil has fallen by 0.57%.

The LEI shows that towards the end of 2011 wholesale energy costs rose sharply, falling back overall to date, although there are indications of mounting pressure in the market that will see rises over coming months and into 2013 on commercial tariffs. Crude oil prices remain volatile, with the Brent Crude price per barrel starting the year at $112, peaking in March ‘12 at $126, and currently at $116/barrel and rising. This current rising price trend is despite concerns over Euro Zone debt and flagging energy demand in China.

The Lorien Energy Index (LEI) was launched at the beginning of 2012 with a value of 4.40, a 250% increase since early 2006 (from a value of 1.75).  The recent update sees a small drop to an average of 4.28 demonstrating little significant movement over recent months.

Derek O’Neill, director of Lorien Engineering Solutions said, “What is worrying is that whilst we may see inflationary level increases in 2012 for energy, this is on the back of subdued world demand for oil and gas. If economic growth returns in 2013, we could see substantial price increase again in the cost of energy for businesses.”

Background Data:
Demand for oil and gas has slowed in 2012 as industrial output has slowed and it is pleasing to see the price increase trend businesses suffered in 2011 is abating. Both gas and electricity prices to businesses declined in Q2 of 2012, electricity prices fell by 1.22% in Q2 bring the YTD reduction in prices to 2.16%. Gas prices fell by 1.24% in Q2 although not enough of a fall to wipe out the Q1 increases leaving Gas 0.7% higher than it was at the beginning of the year.

The picture for the last 12 months is that Electricity prices are up 5.15% and Gas is 9.82% higher.

In the domestic market, one of the big six energy providers has announced a 9% increase to its domestic customers for both electric and gas.  This goes against the pricing stability seen since prices decreases late 2011 and early 2012.