High gas, power prices due to speculation, not fundamentals: P&G
London (Platts)--28Apr2005
Current high European gas and power prices are the result of speculation rather than fundamentals, Proctor and Gamble's Kirill Kuchay said Wednesday at the JHA 2005 annual conference. Prices are being driven by opportunity costs between commodities, and gas and electricity markets are becoming an alternative investment opportunity. Kuchay said high prices meant it was a suppliers market and that "suppliers are the market." With suppliers pricing "at the market," there is no difference between them price-wise, as they offer identical quotes. For customers this means there is no competition and no opportunity to challenge suppliers' dominance, he said. Looking ahead, Kuchay said energy prices would increase and continue to be set by financial players. "There is no fundamental mechanism that will cap prices," he said. "The market will stay as it is. Prices will stay at the market. Suppliers will not go below the market." Kuchay also said he expected more manufacturing capacity to move east from western Europe, while commercial competition would likely be limited unless regulators intervene. This story was originally published in Platts European Power Alert http://www.europeanpoweralert.platts.com
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