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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