Weak pound making gas price rise worse

LONDON (Reuters) - British consumers are facing bigger increases in their energy bills than householders in the euro-zone largely because of the single currency's recent strength against the dollar and sterling, leading energy consultants Poyry say.

Consumers are bracing themselves for huge increases in their gas bills this year, with suppliers poised to pass on a year-long rise in wholesale gas prices soon.

Although British gas contracts are not usually linked to oil prices -- which have more than doubled in the last year -- they are in much of Europe where most gas is bought on long-term contracts.

Because Britain is increasingly reliant on imports from Europe, yet has to pay for the gas with a weaker pound, already inflated European gas prices are even more costly for UK buyers.

"If we had a stronger pound we would have cheaper gas prices," James Cox of Poyry Energy Consulting in Oxford said on Friday.

"The two big factors driving gas prices are oil prices and exchange rates."

In the last 12 months the dollar has weakened by about 15 percent against the euro, effectively giving euro-zone buyers a 15 percent cushion to dampen the impact of soaring dollar-denominated oil prices on their gas supplies.

At the same time, the pound has fallen nearly 17 percent against the euro while remaining fairly stable against the dollar, making imported gas from continental Europe more expensive and giving no protection against the doubling of oil prices in the last year.

But it could have been a lot worse, Cox said, if the dollar had not weakened at all.