Business and economics |

This week it emerged that household gas bills could increase by more than £400 this year.

But investing experts believe the price of gas has further to go, so investing in a fund exposed to the commodity could make sense for those willing to take the risk.

Comparison site uSwitch believes that many households may need to prepare themselves for gas and electricity bills passing the £1,200 mark, following a previous price hike in January.

The chief reason for the rise in household bills is the increasing cost of natural gas itself. Like the majority of commodities, its stock is on the rise.

Patrick Armstrong, at fund management group Insight Investment, says: 'We think that if you like oil here, you must love natural gas.'

Tony Dolphin, chief economist at Henderson Global Investors adds: 'The long term fundamentals for gas, on a five to ten year basis, as a result of continued global demand for energy, are strong.'

The wholesale price of gas had been on the up during the spring because Britain is being forced to import more, rather than rely on North Sea supplies - and the outlook according to experts is not improving.

Last year alone the price of natural gas shot up by 36% to $7.5mmbtu -(Million British Thermal Units) – bringing a total rise over the past decade of 230%, to the end of 2007, according to life insurer Clerical Medical.

British Gas's parent company Centrica, has pointed to the global oil price – it soared to $125 a barrel this month – as the primary driver for lifting the cost of natural gas.

Dolphin says: 'The price is primarily being driven up by the oil price surge – they are competing products. Gas is a cheaper alternative source of fuel, and when oil gets expensive, gas consumption goes up, and with it, so does its cost.

'And of course if oil comes down in price, so typically will gas – they are commodities that deflect off each other.'

Strong global economic conditions, especially in the emerging economies of Asia are driving up energy prices in general. Forward prices are almost twice what they were 12 months previous with suppliers having to pay up to 85p a therm next winter compared to 48p in the winter just passed.

Armstrong points out that in early April the group pulled back their oil investments in favour of natural gas, a position they have been building on since the beginning of the year because the group is viewing the latter as a better alternative right now.

Armstrong says: 'We own 2011 natural gas futures. We expect a 40% return on this, and can see upsides beyond this.'

Ways to invest

There are a number of specialist investments to decide from. The cheapest and easiest way to access the gas market is through an Exchange Trade Fund (ETF) or in this case an Exchange Traded Commodity (ETC).

ETCs are like a traditional tracker fund in that they follow a particular market or index but like shares you can actively trade them during the day. The best pure gas play is the ETF Securities, ETFS Natural Gas fund, which tracks the DJ-AIG Natural Gas Sub-Index.

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