Fossil Fuel Prices

Recently fossil fuels have moved from a stable reference price of between $12-18 dollars per barrel to a price of $130 per barrel in April 2008. Most newly installed generation plant in the West has been gas fired. At the current reference price gas price accounts for 70% of the cost of electricity produced from a gas burner. In China most electricity producing plant is coal fired. Coal has moved from a price of $30 per tonne in 1985 to a $140 per tonne.

Another major element to be considered in the future of electricity prices is the pollution charges that apply. Pollution that arises from nitrogen and sulphur has been largely handled by a combination of plant innovation fines and fuel switching. Carbon however is an inherent end state product when dioxide fossil fuels are used to make electricity. The only way to deal with it is to stop burning fossil fuels.

Fines on the production of CO2 are now being applied under the Kyoto Treaty and EU regulations. In 2008 a tonne of CO2 is trading at €25. This translates into a fine of approximately 1€/KWhr for gas fired generation and approximately €2 for coal fired generation. As climate change concerns accelerate, the fines to be paid will increase.

Most authorities now accept that the peak of oil production is already passed and that gas, although more plentiful, will peak within 10 years.

The following tables show the trends in global fossil fuel prices.



Source: International Energy Agency, Key Wold Energy Statistics 2007, Page 40





                                        Source: WTRG Economics




Source: International Energy Agency, Key Wold Energy Statistics 2007, Page 41





Source: International Energy Agency, Key Wold Energy Statistics 2007, Page 41