Wholesale Energy Prices ??

iangaylard

Several weeks ago we kept on being told that Gas and Electric prices had to rise due to the increase in oil prices ( gas and electric tied to oil prices). The energy companies kept on telling us that due to the price of oil their prices had risen dramatically and they, therefore, had to increase the costs.
However, oil prices have dropped over $35 a barrel in the past month but no announcements from the energy companies to state they are now reducing the energy costs. I have not heard anyone asking or mentioning this or asking the energy companies WHY ?
Can someone please explain why, if energy prices are indeed linked to oil prices, energy prices have not come down ?? and why energy companies are not being forced to adhere to their own statement of facts
FURTHER COMMENT:
I understand that the energy companies do not pay ' spot prices' and buy energy in advance based on the price of crude. However, their forward prices obviously drop as the price of crude falls but the energy companies NEVER reduce thier prices just increase their profits. This, in my very humble opinion, is tantamount to legalised theft via profiteering and cannot be justified in any way by saying they have to think of their profits and shareholders and forward investment - yet we hear yesterday that because of damage to a gas pipeline in the North Sea prices may well soar. Surely this cost should be bourne by the energy companies NOT the customer as it in no way is related to world price of crude. Am I almost alone in thinking that there is some form of ' questionable' (if not illegal) practices being used by the energy companies ????
It is time for serious questions from the relevant authorities concerning the energy companies

DGJsaver

dont worry , an energy company apologist will be along shortly...

SwanJon

DGJsaver wrote: »

dont worry , an energy company apologist will be along shortly...

That'll be me then...

The companies try to change prices as little as possible , and usually buy their energy in advance at forward prices (they'll have already bought most of the gas for the coming winter).

As such the spot (daily) price of gas/electricity doesn't have much of an effect on what we pay.

DGJsaver

SwanJon wrote: »

The companies try to change prices as little as possible

Not doing a very good job of it are they

mech_2

I don't want to get too embroiled in debate, but I'll submit a couple of links so that people can draw their own conclusions.

http://www.parliament.the-stationery-office.co.uk/pa/cm200708/cmselect/cmberr/293/29305.htm
http://www.independent.co.uk/news/business/news/wholesale-gas-prices-soar-by-14-in-a-day-after-north-sea-pipeline-leak-904233.html


DJSaver: Not quite sure what you mean. Utility companies certainly change their prices rather less often than petrol stations do.

DGJsaver

mech wrote: »

DJSaver: Not quite sure what you mean. Utility companies certainly change their prices rather less often than petrol stations do.

And there is certainly more choice for the consumer when it comes to petrol , you are hardly tied in or similar...and they dont get away with 40% + rises twice a year..

1carminestocky

Seeing as we *maybe* have people on here who work for these energy companies, can I ask a question? Here goes...Am I right in assuming the 'gas price is linked to oil price' theory only applies when oil prices are increasing? :rolleyes:

brysiewysie

Although I work in a call centre for a supplier I've never really understood why oil prices affect gas. Gas prices obviously affect elec prices but other than transportation costs why is oil critical in the pricing of gas or is it just they come from the same reserves as oil?

Probably a dumb question!

Despite what people may think or say in response I do believe it's a competitive market.

DGJsaver

brysiewysie wrote: »

Despite what people may think or say in response I do believe it's a competitive market.

To suit their ends not the consumer

1carminestocky

Hence the huge marketing push by BG to market their 2011 Fix when they've never seemed so keen to spend money marketing Click 5.

SwanJon

DGJsaver wrote: »

And there is certainly more choice for the consumer when it comes to petrol , you are hardly tied in or similar...and they dont get away with 40% + rises twice a year..

Well, let's not get carried away. No supplier has raised their prices by 40%+ once, ever, let alone twice a year. And look at how much the price of Diesel has gone up in the last 12 months.

Because the suppliers buy in advance they do not pay the daily spot price. So if the daily price comes down today it won't make a difference to those forward prices they have agreed to pay for the gas we used today.
Forward prices tend to smooth the curve, and the infrequent (compared to petrol) changes tend to smooth it further.
So if prices go down for a month then back up again we (customers) probably won't see it reflected in our bills, but the opposite is true too.

Click is an internet only tariff, so should it be advertised to everyone, including those who cannot use it? By limiting it to the internet it is much more focused on the target audience. You have to admit that if you use an online comparison site it has been shown.

I've said elsewhere why I think (me, not nececsarily anyone else) fixed plans can work for suppliers - the customer is less likely to switch, churn is reduced so the cost of acquiring the same customer back (think of cashback sites/commision), and they will back it by buying the energy in advance., So yes there is something in it for the supplier, but that doesn't mean that there is nothing in it for customers.

When we got all our gas from the North Sea, there was no lin to the price of oil. As we import more and more form Europe and further afield we have to buy it on the world market, and (in Europe at least) gas prices were tied to oil prices as a measure of control over the monopolies. there are also links to old industrial contracts where companies bought gas & oil from the same place.