WHOLESALE GAS and electricity prices fell in May as markets nervously assessed global economic uncertainty and political repercussions of the European debt crisis.

The Bord Gáis Energy Index, which measures prices in the wholesale energy market, fell by 7 per cent to a reading of 142 due to a combination of lower natural gas, coal and electricity prices.

However, the index still remains 1 per cent higher than the same time last year.

Oil prices, which have a big influence on overall energy costs, fell 15 per cent in dollar terms. This was the largest monthly price fall in two years with the price of a barrel of oil reducing during May from $119.47 to $101.87 under the combined weight of political uncertainty in Europe, global economic weakness, increased supplies from Opec and the easing of concerns over Iran’s nuclear programme.

However, Irish consumers failed to reap the full benefit of that decline due to a slide in the value of the euro against the dollar and sterling. But for that, the overall index would have fallen by 11 per cent.

“Although talks between Iran and the UN in Baghdad in May failed to make any progress, tensions over the disputed Iranian nuclear programme did ease and this put additional downward pressure on Brent crude oil prices,” said Bord Gáis trader John Heffernan.

The quantity of oil produced by Opec countries was also a factor weighing on oil prices, he added.

“With oil production from Opec countries at elevated levels not seen since October 2008, demand destruction in Europe and the US and muted oil demand growth in China, it is now estimated that the oil market is oversupplied by around 500,000 barrels a day.”

The index reading for natural gas was down 3 per cent month-on-month to 203, but still 10 per cent ahead of May 2011. Prices were supported at the start of the month by the erosion of high stock levels during April, a cold start to the month and processing plant outages which reduced gas supplies from Norway to Britain.

Constraints in Britain affect natural gas prices in Ireland as it is a key supplier to the Republic.

Gas prices started to fall mid-month due to warmer weather, healthier supplies of gas to the UK and falling demand. Electricity prices were 5 per cent lower.

The final element of the index, coal, was up 4 per cent month-on-month due to warmer weather, increased renewable generation capacity (which is displacing thermal generation such as coal) and weakening economic activity.