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In these times of change, many market participants are finding that traditional historical price models are less useful than in the past. As oil prices hit record highs again, chartists and modellers are in new territory, with no historical indicators with which to steer.
In the past, the cost of production has tended to exert a familiar and reliable mean-reverting influence on energy prices, causing them to return to long-term stable levels.
Now, with the cost of production soaring, it has become an unknown force driving prices higher, rather than an anchor pulling them down.
With energy quants and analysts the world over revisiting some of their trusty models and perceptions about the market, one target ripe for reassessment must be the oil and gas price link. While some have argued for years that linking gas prices to oil is inefficient, there has always been a reluctance to seriously move away to alternative practices and contracts. Oliver Holtaway revisits the topic on page 14 and finds that some headway is now being made.
Our cover story this month looks at ambitious plans in Ireland to link the power markets of Northern Ireland and the Republic of Ireland. All eyes will be on the plans as they unfold, as this collaboration could provide valuable lessons for the EU in its plans for a united European energy market.
Finally, our special report provides a global perspective on emissions trading, with articles on the latest developments in Europe, Australia and the US.
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