Crude oil prices on roller coaster ride.

International commodity markets displayed two entirely different developments in 2008: They were more bullish than ever in the first half of the year. This was followed by an even stronger bearish trend in the second six months. Price swings were especially pronounced on international crude oil markets. Quotations for a barrel of North Sea Brent, which stood at US$97 at the beginning of 2008, climbed to records exceeding US$140 in early July, before falling to US$37 by the end of December, far below their starting point. The average price paid for a barrel of Brent crude in the period under review was US$97, which was a third more than in 2007. The huge jump in crude oil prices in the first six months of 2008 was due to increasing demand from newly industrializing countries such as India and China. Furthermore, political tension such as over Iran’s nuclear programme led to fears about adequate supply. Increased speculative cash investments in raw materials also contributed to the rise in prices. The dramatic collapse of oil prices in the second half of the year is a result of the economic cool-down and the ensuing drop in demand for crude oil.

Gas prices much higher than previous year due to oil price trend.

European gas prices track developments on the oil market. However, this normally happens with a lag. Gas imports to Germany were 36 % more expensive than in 2007. Changes in import prices are passed through to end customers with a delay too. Therefore, the average gas bill paid by industrial customers was only 18 % higher year on year. It was up 9 % for households and small commercial enterprises. In the Czech Republic, our second-largest gas market, end-customer prices were adjusted sooner. Tariffs rose 30 % for industrial customers and 22 % for household and commercial customers. Quotations on the UK gas spot market more than doubled compared to the previous year. In addition to the influence of the price of oil, the significant rise in demand also played a role. According to preliminary surveys, UK industrial and commercial customers paid approximately 50 % more than in 2007. Price adjustments in this customer segment are made much earlier than in the residential retail business, which saw gas prices increase by an estimated 23 %. On the Hungarian market, gas prices advanced by 15 % for industrial companies and 16 % for households.

Hard coal prices: summer record high followed by substantial fall.

International hard coal markets followed a price curve similar to the one for crude oil, but the range within which it fluctuated was marginally smaller. In Rotterdam spot trading, the price for a metric ton of power plant coal rose from US$125 (including freight and insurance) at the beginning of the year to its peak of US$225 in July–an all-time high. Strong demand for raw materials from Asia and transport bottlenecks in Australia and South Africa, both of which are supplier countries, characterized this phase. Subsequently, prices collapsed dramatically when the financial crisis came to a head. At the end of the year, the price for a metric ton of hard coal hovered around the 80-dollar mark–in part because sea freight rates spiralled downward. By year-end, they were less than a tenth of their all-time high recorded in June when the standard route from South Africa to Rotterdam cost up to US$64 per metric ton. As a result of the economic slowdown, numerous ocean freighters were left without a payload.

Despite the most recent decline in prices, hard coal quotations averaged for the year were much higher than in 2007. In Rotterdam spot trading, the average price for 2008 was US$148, compared with US$89 a year earlier. German hard coal prices are determined by the German Federal Office of Economics and Export Control (BAFA). Since they are linked to the price of imported hard coal, they track developments on international markets, albeit with a slight lag. No BAFA figures were available for the full year when this report went to print. According to official data, the BAFA price for the first three quarters amounted to €110 per metric ton of hard coal unit. €135 is the estimate for the fourth quarter. On this basis, the BAFA price for the year as a whole would exceed the 2007 level (€68) by more than two thirds.