should I go fixed price?

chrisski

Is it advisable to go fixed price? does anyone know?

iamesbo

Given that the price of energy world wide has halved it would seem foolish to fix.
However the gas market is run by a criminal cartel so they can charge what they like.

moonrakerz

iamesbo wrote: »

However the gas market is run by a criminal cartel so they can charge what they like.

Yawn !!! (again)

1carminestocky

To the OP, only YOU can truly decide this. All I would say is, if the UK energy industry was like the vast majority of other industries, the prices would be coming down significantly at the moment. Unfortunately, AT THE MOMENT, it gets away with its actions. But I fully believe that its days of acting in this way are truly numbered. Whilst I accept that iamesbo sometimes goes over the top with regard to his views on the energy industry, he's probably not a bad person to have on here in order to counter the vast amount of industry employees who post on here in support of their employers but don't have the guts/morale fibre to actually TELL you where they work.

SmartRRRR

I have been thinking about the ongoing effect of fixed price fuel deals.

Martin has encouraged us all on TV to get on a fixed tariff, so imagine (wild numbers just for example) 50% of the customers of one supplier get their prices fixed.

If the wholesale price soars by 50% (not unusual, we are told) then those customers who have not fixed their prices will have to be charged 100% more for the supplier to get the same revenue. This means the price fluctuation will be twice as high, hence the high increases currently floating around. I'm sure nowhere near 50% have fixed prices, but the overall effect is similar.

Am I missing something?

1carminestocky

SmartRRRR wrote: »

I have been thinking about the ongoing effect of fixed price fuel deals.

Martin has encouraged us all on TV to get on a fixed tariff, so imagine (wild numbers just for example) 50% of the customers of one supplier get their prices fixed.

If the wholesale price soars by 50% (not unusual, we are told) then those customers who have not fixed their prices will have to be charged 100% more for the supplier to get the same revenue. This means the price fluctuation will be twice as high, hence the high increases currently floating around. I'm sure nowhere near 50% have fixed prices, but the overall effect is similar.

Am I missing something?

But we have been pre-conditioned to only expect increases when it comes to energy companies! These are currently 'thinking outside the box' times, though, where the old ways are seemingly being replaced by new thinking and more state control over previously lightly regulated industries. The FSA were classed as a light regulator and look what happened there!! Ofgem are also a 'light' regulator (some would say light and useless) but I genuinely don't believe the vast majority of people believe light regultion actually works now (INCLUDING the Govt) so expect much tougher regulation of the industry and expect them to have to justify why their prices are now so out of step with 'other' fuel industries. Prices are coming down and the energy company's cozy little world may never be the same again. Personally, I can't wait..

lightSwitch_3

If the recession continues until the end of 2010 and it probably will then crude will stay at about $60 a barrel unless the Cartel cuts crude supply drastically and plays havoc with the demand/supply curve, this unlikely to happen.
Personally I am not looking for a fixed rate now as prices on balance of what I said above should come down.

iamesbo

moonrakerz wrote: »

Yawn !!! (again)

Oh what's this a gas company shrill bored by talk of a criminal cartel rigging the market?

Well you better get your sleeping cap on because you will be hearing a lot more about it untill prices drop and more calls for them to be imprisoned at the very least.
Same goes for OFGEM, the so called 'regulator'.

Cardew

SmartRRRR wrote: »

I have been thinking about the ongoing effect of fixed price fuel deals.

Martin has encouraged us all on TV to get on a fixed tariff, so imagine (wild numbers just for example) 50% of the customers of one supplier get their prices fixed.

If the wholesale price soars by 50% (not unusual, we are told) then those customers who have not fixed their prices will have to be charged 100% more for the supplier to get the same revenue. This means the price fluctuation will be twice as high, hence the high increases currently floating around. I'm sure nowhere near 50% have fixed prices, but the overall effect is similar.

Am I missing something?

I don't think you are missing anything at all.

With fixed/capped tariffs there is always a cross-subsidy between a company's various tariffs.

Firstly the fixed/capped deals are normally based on the most expensive standard tariff, and often a premium is charged on top of that tariff.

So initially there is a larger profit margin on these deals and in effect a cross-subsidy to enable cheaper deals like the internet deals(and of course maintain the all important profit margin!!)

In an era of ever increasing prices, these deals eventually start to benefit the customer and they then will, in effect, be cross-subsidised by the other customers.

Taking BG earlier this year they stated they had about 2 million of their 16 million customers on fixed tariffs. Currently those on the 2011 and 2012 are paying 'over the odds' and those on the 2 x 2009 and 2010 deals are paying 'under the odds'.

If prices drop, or even remain static, then the 2011 and 2012 customers will take even longer before they start to see any benefit - indeed if they ever see a benefit!! However that was the gamble they took when electing for a fixed tariff. They might cut their losses, pay the penalty and quit.

Of course prices may not drop!!!

iamesbo

SmartRRRR wrote: »

I have been thinking about the ongoing effect of fixed price fuel deals.

Martin has encouraged us all on TV to get on a fixed tariff, so imagine (wild numbers just for example) 50% of the customers of one supplier get their prices fixed.

If the wholesale price soars by 50% (not unusual, we are told) then those customers who have not fixed their prices will have to be charged 100% more for the supplier to get the same revenue. This means the price fluctuation will be twice as high, hence the high increases currently floating around. I'm sure nowhere near 50% have fixed prices, but the overall effect is similar.

Am I missing something?

Yes you are missing the fact that the real price of energy and gas has almost halved, so if it were to double it would only be the same as a fixed rate is now.

The chances of prices doubling to twice the current fixed rate represent an oil price of $330 a barrel, which is pretty unlikely given that the current price for oil is about $60 a barrel and dropping. We are being charged for gas based upon an oil price of
$145 a barrel, which is 2.4 times as much as we should be paying.

That is disgusting, and that's why the gas company bosses should be in jail.

mech_2

iamesbo wrote: »

Yes you are missing the fact that the real price of energy and gas has almost halved,

Forward wholesale gas prices have fallen by 30% from their peak, though it's not likely that current retail prices reflect the peak value anyway. The chances are that domestic prices are currently at around the right value to match the wholesale market, so it's what happens from now on that determines the likelihood of utility bills going up or down.

Oil hasn't shown any enthusiasm to fall below $60 a barrel over the past week, and a drop in the value of the pound means that in real terms the oil price has effectively gone up slightly for the UK. Therefore I don't see any downward momentum there, but the good news is I don't see any upward momentum right now either.