Energy has become a hot political topic in Europe. Oil price volatility, cross-border mergers and concern about global warming and the security of future oil supplies have conspired to keep the issue in the headlines. Added to this have been fears that the Kremlin will use our increasing dependence on Russian gas as a geopolitical weapon, and the European Commission’s plan to tackle climate change while pushing on with energy market liberalisation.
In all this some basic realities of energy markets seem to be have been forgotten, in particular the growing connection between electricity and gas markets. Electricity market liberalisation has meant that wholesale prices are no longer set by regulated utilities on the basis of production costs, but by supply and demand.

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