Tensions between West and Iran main cause of higher oil prices in February

Rising international tensions, supply constraints and a severe winter across continental Europe contributed to an 8 per cent rise in wholesale energy prices last month. Oil prices increased by 9 per cent and gas prices soared by one-fifth as fuel costs hit levels not seen since 2006, pushing the Bord Gáis Energy Index to a record high.

The price of oil increased in February as tensions between the west and Iran escalated. Oil opened the month at $111 per barrel and closed it at $123 over fears global supply could be interrupted as a result of the tensions.

Further economic data suggesting the global economy is recovering slowly further supported the rise in oil prices.

Gas prices increased as a result of the severe weather snap, which saw large areas of eastern Europe under snow and ice. The cold weather forced continental countries to seek UK gas exports to compensate for reduced supply from the east, pushing prices higher. Day-ahead prices hit their highest level in more than six years on the UK gas trading hub at over £1 per therm.

The mild weather in Ireland last month was a factor in prices remaining restrained as demand was subdued despite the significant rise in the cost of electricity production.

John Heffernan of Bord Gáis Energy said: “Oil prices will continue to be driven mainly by the market’s perception of tensions between the west and Iran.”