The oil application of fixed prices designates the coupling of the price for natural gas to the oil prices.

Definition

The oil application of fixed prices is not legally embodied, but an international industry-internal agreement between foreign producers and German importers. It sits down away over all supplying stages of the producer, over the importers, long range gas companies and gas supply enterprise up to the final consumers. With the organization the application of fixed prices gives it the verschiedenensten variants: Connection at crude oil places, connection to petroleum products (fuel oil, fuel oil), definition of the reference prices (Federal Statistical Office/Wiesbaden, Rotterdam,"…). Usually natural gas has one opposite oil by 3-6 months retarded price history. The price adjustments take place thereby in a quarter-wise or half-yearly rhythm.

At the world-wide heating market fuel oil is the most important competition energy to the natural gas. Big consumers in the chemical industry and in the energy industry are frequently equipped with plants, in which both sources of energy can be used alternatively. Also with new investments in the energy production both sources of energy stand in direct competition. For competition reasons therefore the gas price orients itself durably at the fuel oil price.

The oil application of fixed prices was introduced to the 1960er years and served in particular the safety device of investments within the range of the promotion and line of natural gas: Because for the production and the transport of natural gas large investments were necessary, the producers with the marketing gas supply enterprises (GVU) locked contracts of many years, which are consulted also for the provision of security of the investment financing. Contrary to the oil there is no market therefore for natural gas, at which freely available quantities are acted to market prices,

Usually the quantity risk carries the driving out GVU, it must the agreed upon natural gas anyhow refer and/or pay (Take or Pay contracts). The price risk is - in the way the oil application of fixed prices - with the producer: After natural gas stands in substitution competition to oil, the producer gets the price paid, which is attainable at the market.

In nearly all long-term natural gas supply contracts is therefore oil application of fixed prices. A new development - toward an independent market price - could result however from that ever more strongly and more flexibly becoming market tendency for liquefied natural gas (LNG).

The Federal Cartel Office and consumer protection organizations criticize the connection as outdated, particularly since it is not given for a number of other States of (under it for instance Great Britain). It is to be noted that Great Britain appeared had large Erdgasvorkommen and until recently still as a natural gas exporter at the market. Therefore Great Britain did not have to be afraid in the past for its supply of sufficiently natural gas. On this basis also no cause insisted for long-term import contracts for Great Britain, which the oil application of fixed prices is subject. Large gas export your, like for example gas PROM in Russia, insist however further on the oil application of fixed prices.

Reference price, 6/3/3-Regelung

In as reference price for the oil application of fixed prices of the gas prices frequently the price for light fuel oil (HEL) is used, that is determined and published by the Federal Statistical Office for supply in tank cars, freely consumers, with 40-50 hl per order. These publications can be called up on the web page of the statistic federal office free of charge (see Web left below).

Around the development of the gas prices in the course used with gas supply contracts frequently the 6/3/3-Regelung in such a way specified will smooth:

• 6 months reference period
• 3 months "“time lay"” (time disalignment)
• 3 months price validity

Example:

Light fuel oil (HEL), 40 - 50 hl, Rhine rail, time of the price statement in 12/04,

Literature

• Vincent Beuret: Coupling between natural gas and petroleum price, in: The national economy, 9/2005
• Andreas Schirmer: Gas prices under pressure, in: Ludwig Erhard donation (Hrsg.), ImKlartext, October 2005, page 2 f.

see also

Energy market

Related links

• Federal Statistical Office Germany - note: The prices are to find under specialized series 17 row 2 as "“prices and price indices for commercial products (producer's prices)"”

Articles in category "Oil application of fixed prices"

We found here 1 articles.

Related Websites

We found here 3 related websites.

• Hedging Strategies for Oil End Users
  Application. An Oil Refinery purchases a crude oil swap from SET for a fixed price of $21.00/bbl (when the market price is $22.00). ...


• Hedging Strategies for Oil Producers
  Application. A Producer sells a crude oil swap to SET at a fixed price of $23.00 (when the market price is $22.00). If the market settles below $19.00/bbl ...


• Southern Counties Fuels
  To obtain details of our current fixed price please telephone or email, ... you like confirmation of your Signalman application or fixed price acceptance ...