| THE UK is broken, part 356789437 14:35 - May 17 with 699 views | SaleAway |
https://news.sky.com/story/the-surreal-but-also-real-problem-of-britains-gas-glu
Really interesting article on the fact that UK gas and electricity prices are currently the lowest they've been in 18 months. We have too much gas, we're exporting cheap electricity, but somehow, we're all paying massive fuel prices.
Some people are making huge amounts of money... while others can't afford to eat... but they government aren't interested.....
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| THE UK is broken, part 356789437 on 07:55 - May 18 with 546 views | SaleAway |
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| THE UK is broken, part 356789437 on 08:06 - May 18 with 519 views | Steve_M |
Two linked things stand out here:
1). Getting rid of gas storage was stupidly short-termist, but the UK market is all about marginal costs and Rough was uneconomic in the short-term;
2). Infrastructure is a long-term investment that governments should make, privatisation has hidden that and provided incentives to reduce infrastructure spending (see also sewage in rivers.
On that article though, one thing it alludes to but downplays is that energy companies are not always buying gas at spot prices but plenty at forward prices so, in the UK, the price cap meant that increased costs were being absorbed at the wholesale level and are now being felt.
Spot gas prices will not stay low in the UK into the Winter without a resolution of Ukraine (read: Russian defeat) and even then the need to reduce dependence on Russian energy will keep costs higher than otherwise. Volatility is also going to remain high.
I don't think this is simply price gouging. [Post edited 18 May 2022 10:42]
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| THE UK is broken, part 356789437 on 08:17 - May 18 with 493 views | BanksterDebtSlave |
Lol, it's almost as if institutions throughout Europe (by which I include the UK) have been pushing just in time globalism in a blind quest for short term wealth extraction! Now who would possibly vote for, and thus consent to, institutions that prioritise that? |  |
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| THE UK is broken, part 356789437 on 08:19 - May 18 with 485 views | SaleAway |
| THE UK is broken, part 356789437 on 08:06 - May 18 by Steve_M |
Two linked things stand out here:
1). Getting rid of gas storage was stupidly short-termist, but the UK market is all about marginal costs and Rough was uneconomic in the short-term;
2). Infrastructure is a long-term investment that governments should make, privatisation has hidden that and provided incentives to reduce infrastructure spending (see also sewage in rivers.
On that article though, one thing it alludes to but downplays is that energy companies are not always buying gas at spot prices but plenty at forward prices so, in the UK, the price cap meant that increased costs were being absorbed at the wholesale level and are now being felt.
Spot gas prices will not stay low in the UK into the Winter without a resolution of Ukraine (read: Russian defeat) and even then the need to reduce dependence on Russian energy will keep costs higher than otherwise. Volatility is also going to remain high.
I don't think this is simply price gouging. [Post edited 18 May 2022 10:42]
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I think the thing about this though, and it reminds me of the 2009 banking crisis.... is that the regulator is supposed to look after consumers and suppliers. It appears that during the good times the operators are able to take the profits, but then, when the market is difficult, they fold, and the consumer is left picking up the bill....
If the regulator can't manage a properly functioning market ( and part of the thing that wound up Martin Lewis so much was that the regulator was trying to make it harder for suppliers to discount rates), then we need to go back to a nationalised energy supplier.
Which obviously relates to your point about infrastructure... and the general tone of my thread... the UK is broken. Plenty of people are making huge amounts of money, but our infrastructure is a mess, and people can't afford to eat and heat their homes.
12 years of prioritising business over the generaly population has led to this. I agree with you, this is not "price gouging", its worse than that. Its a symptom of a country with a broken energy system. | |
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| THE UK is broken, part 356789437 on 08:22 - May 18 with 473 views | Dubtractor |
| THE UK is broken, part 356789437 on 08:06 - May 18 by Steve_M |
Two linked things stand out here:
1). Getting rid of gas storage was stupidly short-termist, but the UK market is all about marginal costs and Rough was uneconomic in the short-term;
2). Infrastructure is a long-term investment that governments should make, privatisation has hidden that and provided incentives to reduce infrastructure spending (see also sewage in rivers.
On that article though, one thing it alludes to but downplays is that energy companies are not always buying gas at spot prices but plenty at forward prices so, in the UK, the price cap meant that increased costs were being absorbed at the wholesale level and are now being felt.
Spot gas prices will not stay low in the UK into the Winter without a resolution of Ukraine (read: Russian defeat) and even then the need to reduce dependence on Russian energy will keep costs higher than otherwise. Volatility is also going to remain high.
I don't think this is simply price gouging. [Post edited 18 May 2022 10:42]
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Two points in your post that I can support with experience in my job.
Infrastructure - repeated governments, including the last Labour government, have been happy to sit back and let the market dictate. This has resulted in significant offshoring of Infrastructure that we really need in this country, and we're now playing catch up. This is why so much of our recycling ends up overseas.
Electricity market prices - I deal with a (relatively) small scale generator, and almost all of their production is sold at prices set 6 months in advance. This is obviously just one small example, but I'm sure it is the norm as businesses like financial certainty.
Edit: this isn't a defence of the energy industry or ofgem, for the avoidance of doubt! [Post edited 18 May 2022 8:36]
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| THE UK is broken, part 356789437 on 09:05 - May 18 with 424 views | Steve_M |
| THE UK is broken, part 356789437 on 08:19 - May 18 by SaleAway |
I think the thing about this though, and it reminds me of the 2009 banking crisis.... is that the regulator is supposed to look after consumers and suppliers. It appears that during the good times the operators are able to take the profits, but then, when the market is difficult, they fold, and the consumer is left picking up the bill....
If the regulator can't manage a properly functioning market ( and part of the thing that wound up Martin Lewis so much was that the regulator was trying to make it harder for suppliers to discount rates), then we need to go back to a nationalised energy supplier.
Which obviously relates to your point about infrastructure... and the general tone of my thread... the UK is broken. Plenty of people are making huge amounts of money, but our infrastructure is a mess, and people can't afford to eat and heat their homes.
12 years of prioritising business over the generaly population has led to this. I agree with you, this is not "price gouging", its worse than that. Its a symptom of a country with a broken energy system. |
The thing to understand about Ofgem is that the over-riding mentality is (or certainly was) textbook economic theory of competition and marginal pricing and everything else follows from that. It isn't so much market capture here as a restricted outlook that leads to some woolly thinking (and at one stage I spent a lot of time dealing with them).
This doesn't work with things like power stations because, when a 500MW generating set trips (as they do occasionally) that causes a big hit. Add to that a market mechanism that penalises large, unplanned imbalances and that is is why, at one stage, the UK market was dominated by vertically integrated (i.e. generation + supply) companies - there's a natural hedge.
And then Ofgem pushed competition at the price of stability, hence all of the small companies that didn't bother hedging sales and have all gone bust as a result, with the rest of the market, and ultimately consumers, picking up the bill. | |
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| THE UK is broken, part 356789437 on 10:27 - May 18 with 350 views | fab_lover |
| THE UK is broken, part 356789437 on 08:17 - May 18 by BanksterDebtSlave |
Lol, it's almost as if institutions throughout Europe (by which I include the UK) have been pushing just in time globalism in a blind quest for short term wealth extraction! Now who would possibly vote for, and thus consent to, institutions that prioritise that? |
Spot on.
The prime reason IMHO to expand the EU (and for avoidance of doubt, I'm a Europhile) was to get to privatise the nationalised energy industries, and just like dear old Maggie had done in the 90s, make a lot of people very rich at the same time.
However privatisation of essential services can only work with a tough regulator, and the regulators in the UK are toothless.
I heard the Energy regulator on the radio yesterday going that "no one could foresee the current situation" and I wanted to scream. When supply of a product is outside of your control, of course you need to war-game scenarios where that supply is interrupted. Things happen, always, and to blindly assume that tomorrow is going to be like today is madness.
However all we see whether its energy companies or banks, it's "heads I win, tails you lose". All the benefits of a private company - able to take out as much as is legal - then when things fail, the Government steps in and we all ultimately pay the price. It's a rigged system, and heads need to go on poles as a result...no chance of that, sadly. |  | | |
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