TWO YEARS ago when an investment analyst at Goldman Sachs, the world's biggest securities firm, predicted that the price of a barrel of oil would reach $100 by 2009, the financial markets dismissed his forecast as far-fetched. Yesterday, however, oil was trading at $125 - a higher price, and a year earlier, than the analyst had estimated. Last month, Goldman Sachs once again revised upwards its oil price target. And this time it suggested oil could reach $200 a barrel within the next two years.
High energy prices have become a permanent feature of the economic landscape, driven by strong growth in the world economy and by supply constraints. They are no longer a passing phenomenon. That leaves Ireland, as a major energy importer, vulnerable on two counts at least in the short term: first, to the high cost of energy and second, to any instability in supply, arising either from political tensions in the Middle East or from disruptions to the Russian gas pipeline.
Ireland currently imports about 85 per cent of its gas needs and natural gas is used to generate close to half of the state's electricity needs. The Corrib gas field, which is due to come on stream late next year, will make a difference. At full production, its output will supply 60 per cent of natural gas needs. That will greatly reduce national dependence on imported energy, and ensure security of supply for a decade.
Bord Gáis was set up as a State company to manage the supply, transmission and distribution of natural gas in Ireland. On Wednesday, the company's chief executive, John Mullins, announced some ambitious expansion plans. Bord Gáis proposes to spend €2 billion rebuilding its operation to compete in the domestic energy market, and to sell both gas and electricity to customers. The "dual-fuel" utility model is a common feature of the European energy market. For Bord Gáis this expansion represents a logical commercial development, which will allow the company offer its 600,000 gas customers the option of receiving electricity as well. By 2014 the company expects its business to be split evenly between electricity and gas supply.
For consumers, the arrival of Bord Gáis as a "dual- fuel" supplier is a welcome and long overdue development in an electricity market too long dominated by a State monopoly, the ESB. The entry of Bord Gáis into the electricity market offers choice, and provides competition. And greater competition should result in a better service and keener prices for customers.