oil prices below $50 a barrel!! still no price cut!!

adprob

1carminestocky wrote: »

Yes, the energy companies have been caught with their trousers round their ankles with this one, haven't they? There's no way they could have seen what was going to happen to oil prices at the end of July, in fact I would imagine they assumed they would continue rising from the $147 a barrel they hit at that time. So, I'm sure they thought, let's get it out there that gas price is linked to oil price and the coast is clear. Oh, and did they get it out there, the 'link' was everywhere! LMAO! What happens? Less than 4 months later and the price of oil has decreased by approx 75%!! :rotfl:

Big panic, !!!!!! can we say now? :eek: I know, let's say NOTHING. That usually works. :rotfl:

I agree prices should come down asap, however, whilst the price of gas HAS COME down it HAS NOT come down at the same rate as the price of oil. I read an article that gas is still approx 30% higher than this time last year. That is something the energy companies have no control over.
The fact is that the UK is dependant on imports through Europe now and as such our energy policy is more and more being taken out of our hands.

adprob

just some food for thought
sse 6 mthly profit = 302 mil & they have 8.5 - 9 mill customers. i will use the lower figure. if the were to give ALL their profit to their customers this would reduce their bills by only £35.53 per year.
so last years profit of 1 billion, using the same idea, would bring bills down by £117.64.
also this profit is from across all their business' and not just domestic customers.

1carminestocky

adprob wrote: »

just some food for thought
sse 6 mthly profit = 302 mil & they have 8.5 - 9 mill customers. i will use the lower figure. if the were to give ALL their profit to their customers this would reduce their bills by only £35.53 per year.
so last years profit of 1 billion, using the same idea, would bring bills down by £117.64.
also this profit is from across all their business' and not just domestic customers.

Lots and lots of 'duplication' with a non-state run energy industry. 6 super computers (HUGELY expensive and a drain on profits but also handy to maximise tax savings, of course), 6 sales depts we wouldn't need, 6 retentions depts we wouldn't need, 6 door knockers/liars depts we wouldn't need and an expensive white elephant we probably wouldn't need in its present format (ofgem). Lots and lots of waste in the energy industry, mainly borne out of the laziness that manifests itself when an organisation doesn't have to try too hard to have millions of customers....

PrinceGaz

mech wrote: »

My take is that it's unanswerable. My only point was that reactor's calculation was not a realistic way to make a judgemnt. Given that prices for most forms of energy are linked to oil, it's probably not worth assessing how expensive the electricity is to actually generate anyway. Maybe we could estimate its profitability for generators, but ultimately I'm not that interested. It's going to be far more complicated than modeling the utility companies' wholesale gas costs at the day of supply and that was hard enough. It's not just the formulas, it's the sheer quantity of data.

Not really a surprise. But now you need an up-to-date figure on the UK's average coal fired power plant efficiency level. And carbon credits hit coal harder than gas, so that ought to be factored in. Coal is easy to store as well (you just stick it in a big pile), so you also need to know how far ahead of burning it it is bought and how much of it is traded on the futures markets and what happened to those prices. I can't be bothered, TBH.

The impact of coal is very difficult to measure, and you are certainly right that it is much easier to store large quantities in advance of when it is needed (witness the 1980s Miner's strike which had no real impact on the electricity supply because all the coal power stations had massive piles of coal stored up in advance).

I'm not going to attempt to guess at a real figure, and whilst there may be some truth behind the power companies subsidising gas prices from electric-only consumers, I don't have any way of proving that might even possibly have happened. All I know is that dual-fuel discounts are generally higher for both gas and electric, than what a customer requiring electric-only would receive, but if you shop-around carefully, electric-only customers can find equally competitive deals. And that's what we do here, though we are very much in the minority.

Not really. The economics of French nuclear power are not transparent. The state still has involvement and figures for subsidies are not publicly available. The French certainly have to trade a lot of electricity with their neighbours though, because nuclear is strictly baseload. This is good when we're comparing it with windmills, but not good when you have such dependancy on it that you have to buy energy from neighbouring countries to balance electricity demand. Central Europe operates effectively as one homogenous electricity market as far as I'm aware.

Nuclear (like coal) is very much base-load generation like you say, only gas-turbine plants can really be very quickly brought up to full power from ticking over to cope with sudden peaks. The fact that central Europe operates as one homogenous electric market and we are not part of it is wrong. The English Channel can easily have heavy cables laid across it, so we should be part of that market. We have a serious amount of gas-powered stations which can cope with peak demand, and an ever reducing amount of base-load capacity due to our nuclear and coal plants being phased out (and the joke that is wind-farms is irrelevant). It would seem that ourselves and France would make good partners given how France can supply a solid base-load supply for themselves and others, and Britain can fire up its numerous gas-powered plants to supply peak-demand as needed (then quickly shut them down when they're not). Some additional investment here in additional gas storage facilities would definitely be beneficial though as Britain's current storage capacity is woefully inadequate.

I'm not sure they're cheap. The build cost is large and has to be recovered. The timescales are long. They are reliable for the moment. But if every other country has the same idea, uranium prices could become more of a factor. Currently less uranium comes out of the ground than is consumed. Unless a lot more mines are opened we're in for either sky-rocketing fuel costs or interruptions in supply. Britain can't control its supply as it doesn't have any uranium deposits.

I never said building nuclear plants is cheap (and is a lengthy process), and I know that decommissioning them is also very expensive, but running them 24x7 churning out a reliable source of electricity from inexpensive fuel is quite cheap. It doesn't matter if "every other country" (or those that the US and A allows to have any sort of nuclear technology, anyway) has the same idea, as nuclear fuel is unlikely to rise much in price as there are massive unused uranium reserves available around the world.

One reason why we aren't digging as much of it out the ground now is because we dug rather more than we needed in previous decades during the cold-war period, and the uranium and plutonium in obsolete nuclear warheads can be re-processed for use in power plants -- a very green idea which kills two birds with one bush as not only does it allow electricity to be generated with minimal carbon emissions, but it is also a very good way of using the nuclear material in warheads that are no longer viable for use in obliterating other countries

There's plenty more uranium that can be dug up to keep the entire planet going on it at current rates with known reserves for at least a century, by which time I'd hope nuclear-fusion power generation was providing everyone with almost limitless nearly free electricity. Even if we use much more uranium (instead of gas, coal etc), more sources would no doubt be found meaning that we're not going to run out regardless of how much we rely on it.

You will have to state how you established their current daily profit margins. My model shows them either making a small loss or barely breaking even, depending on their fixed costs.

Either way, price reductions now, in winter, have a larger effect on their profits. Summer prices don't really matter. Low consumption pales any losses into insignificance. Even if they're not making a significant loss right now, they would if they reduced prices 10%. Technically the winter peak is in the second half of January and they would probably be able to cut prices around then. Maybe the middle of January. Is that good enough?

That's a good question, and I'm glad you asked it. I established the major power companies daily profit based on... well actually I guesstimated a figure based on how they have reacted in the past to wholesale price changes, and also on this unprecedented crash in oil and gas prices. It is with this crash in prices that I am saying they should be able to make a reduction now, as nothing like it has happened before. I'll be the first to say that if oil prices suddenly start climbing back up, that the energy suppliers should immediately restore prices to previous levels, but I don't think anyone expects that to happen (unless OPEC seriously cut back production).

If I have got this figured out correctly, they could reduce gas prices by 10% on say 20th January and by the end of February still be able to drop them further. By the end of March they could be 27% to maybe 35% lower than now. I can't see much possibility of prices lower than that for the rest of next year. A 27% reduction would make average retail prices slightly lower than spring 2008 prices, but more than late 2007. 35% less than now would be pushing it and still not as low as 2006 levels. Between maybe 2.5 and 2.9p/kWh (in familiar units).

Now the fun bit. Let's see what actually happens...

Well I think a 15% electric and 20% gas cut is possible now, hedged on the likelihood that the oil price stays as it is (though the currently falling value of the pound may make me revise that to 10% and 15% respectively). By March or April 2009 if prices stay as they are (and that the pound doesn't fall much further), I would expect the reduction compared to current prices to have reached 35% electric and 45% gas as previously posted. Given that the pound is struggling badly now and is expected to fall further, I suspect my expected price reduction may fall to more like 25-30% electric and 35-40% gas next spring compared with current prices, by then.

Which brings us more or less into line, give or take the falling pound.

Cardew

PrinceGaz wrote: »

The fact that central Europe operates as one homogenous electric market and we are not part of it is wrong. The English Channel can easily have heavy cables laid across it, so we should be part of that market.


I

2,000MW requires pretty heavy cables!

The England-France Interconnector is a 2000MW high voltage direct current (HVDC) link between the French and British transmission systems with ownership shared between National Grid and R!seau de Transport d'Electricit! (RTE). The UK landing point is at Baker's Gap, near Folkestone from where the interconnector is cabled underground to Sellindge converter station and connected to the transmission system. The interconnector is approximately 70km in length with 45km of subsea cable. The availability has consistently exceeded 97% per year.

At this very moment we are taking 1,743MW from France

mech_2

PrinceGaz wrote: »

I'm not going to attempt to guess at a real figure, and whilst there may be some truth behind the power companies subsidising gas prices from electric-only consumers, I don't have any way of proving that might even possibly have happened. All I know is that dual-fuel discounts are generally higher for both gas and electric, than what a customer requiring electric-only would receive, but if you shop-around carefully, electric-only customers can find equally competitive deals. And that's what we do here, though we are very much in the minority.

I think Ofgem came to this conclusion by looking at the profit margins. Centrica is an exception as they have fewer of their own power stations, but this is balanced by them having some gas production capacity. I forget the details now.

Nuclear (like coal) is very much base-load generation like you say, only gas-turbine plants can really be very quickly brought up to full power from ticking over to cope with sudden peaks. The fact that central Europe operates as one homogenous electric market and we are not part of it is wrong. The English Channel can easily have heavy cables laid across it, so we should be part of that market.

Whether we can become closely linked enough to be part of the same market or not wasn't really the issue. My point was that France can only get away with such a large percentage of its electricity coming from nuclear because it can load-balance with neighbouring countries. I seem to remember reading something a few years ago about the French government's consternation that their electricity exports came to a net economic loss. Well what do they expect? They have most spare capacity at the times of day no one needs it!

We have a serious amount of gas-powered stations which can cope with peak demand, and an ever reducing amount of base-load capacity due to our nuclear and coal plants being phased out (and the joke that is wind-farms is irrelevant). It would seem that ourselves and France would make good partners given how France can supply a solid base-load supply for themselves and others, and Britain can fire up its numerous gas-powered plants to supply peak-demand as needed (then quickly shut them down when they're not). Some additional investment here in additional gas storage facilities would definitely be beneficial though as Britain's current storage capacity is woefully inadequate.

The gas storage issue has been whipped up no end. There wasn't a problem until late 2005. Events conspired against us as far as I can tell. Key gas fields in the North Sea becoming exhausted sooner than expected, Russia turning off the gas to central Europe, a cold bout of weather and then, to top it off, a fire at the Rough storage facility put it out of action.

The low wholesale prices through 2007 shows just how quickly supply was bolstered, but I'm sure gas storage will now be a recurring meme for years to come.

I never said building nuclear plants is cheap (and is a lengthy process), and I know that decommissioning them is also very expensive, but running them 24x7 churning out a reliable source of electricity from inexpensive fuel is quite cheap. It doesn't matter if "every other country" (or those that the US and A allows to have any sort of nuclear technology, anyway) has the same idea, as nuclear fuel is unlikely to rise much in price as there are massive unused uranium reserves available around the world.

You really should look at what uranium prices have been doing. If expensive reactors that can't be left idle use a fuel that is currently cheap then it's in for enormous price spikes when supply becomes short. This decade we've already seen it increase by 1700% once and it now seems relatively cheap at just 7 times the price it was in 2001. That was just a speculative taster. Imagine the scope for silly prices when supply shocks emerge.

One reason why we aren't digging as much of it out the ground now is because we dug rather more than we needed in previous decades during the cold-war period, and the uranium and plutonium in obsolete nuclear warheads can be re-processed for use in power plants -- a very green idea which kills two birds with one bush as not only does it allow electricity to be generated with minimal carbon emissions, but it is also a very good way of using the nuclear material in warheads that are no longer viable for use in obliterating other countries

Yes great. But that will end around 2013. Mining production is currently 40% behind demand. Nothing I've seen suggests the supply gap can be closed within the decade. On the other hand, nuclear generation is set to expand 20% in the next decade (Russia, China and India). From 7% of total world energy consumption to a whopping 9% (whoohoo, we're saved, global warming is over!).

Seriously though, this means uranium demand will rise by more than 20% because a nuclear power station's first fuelling has to be only partially used. Maybe all the partially used fuel could be reprocessed eventually, but it needs to cool down first and world reprocessing capacity is small. It still adds up to a demand spike at exactly the wrong time.

Put it this way: If I were investing I'd invest in uranium mining in preference to electricity companies with new reactors.

There's plenty more uranium that can be dug up to keep the entire planet going on it at current rates with known reserves for at least a century, by which time I'd hope nuclear-fusion power generation was providing everyone with almost limitless nearly free electricity. Even if we use much more uranium (instead of gas, coal etc), more sources would no doubt be found meaning that we're not going to run out regardless of how much we rely on it.

No, the supply is finite. And if it follows a Hibbert curve like every other mined commodity, production will reach a point where supply can't meet demand, even if there's more in the ground. The best ore deposits are already being mined. Geological data on the distribution of uranium in the Earth's crust shows that these deposits buck the trend of ore quality. Most uranium ore is very low grade. The chances of finding more like the Canadian deposits are not good. The poorer ores get more and more energy intensive to extract until you get to ones with no net energy gain.

That's a good question, and I'm glad you asked it. I established the major power companies daily profit based on... well actually I guesstimated a figure based on how they have reacted in the past to wholesale price changes, and also on this unprecedented crash in oil and gas prices. It is with this crash in prices that I am saying they should be able to make a reduction now, as nothing like it has happened before.

It's very similar to the price crash at the beginning of 2007 albiet from a higher peak. The utilities made huge profits in the first half of the year as they were slow to reduce retail prices quickly enough. To be fair I think it caught them somewhat by suprise as gas started trading as though oil were much lower than it actually was. Maybe they didn't want to go too low in case the following winter prices peaked normally relative to oil. It didn't happen in the end, though gas did rejoin oil prices first half of 2008.

I'll be the first to say that if oil prices suddenly start climbing back up, that the energy suppliers should immediately restore prices to previous levels, but I don't think anyone expects that to happen (unless OPEC seriously cut back production).

No! Even if oil does go straight back up to $150 a barrel between now and July and the pound doesn't recover, it shouldn't affect the possibility of drops in retail prices now. That's the effect of hedging on the futures markets. The overall cost to supply homes with gas is set in stone until at least late April, by which time demand will be tailing off and there will be no pressing need for them to put gas prices up until the start of the next heating season. September-ish. Not sure about electricity.

In that domesday scenario we'd be looking at winter 2009/2010 gas costing us 30% more than it does now (except for people on the present fixed/capped tariffs).

That's not very likely to happen though.

PrinceGaz

Uranium is easy to store, and whilst the price really rocketed last year, it has fallen considerably recently (like oil, gas and coal prices) such that the cost of it isn't really important. The raw uranium itself isn't the main cost to nuclear power generation, it is all the additional processing and safety procedures throughout its use that is the main cost factor. We could easily stockpile many years of uranium reserves here in Britain if there were any reason to do so (provided it was kept in well secured storage areas), certainly far more than the amount of coal that would needed to be stockpiled in what would almost be a mountain outside a coal-fired plant.

I know you say prices shouldn't go back up if oil-prices do, but I think for the average consumer it would be better if the energy companies pre-empted the price-cuts they might make later by making smaller ones now and delaying the rest of the saving until well into summer, so as to save those less well off who live on a fixed income week by week (and usually use pre-payment keys) from running out of money this winter and having to choose between heating and cooking. The energy companies know that oil prices are unlikely to rise, so by holding energy-prices high, they are profiteering at a time when it will hit the elderly and other vulnerable groups the hardest.

That's why I'm saying a small reduction with immediate effect, based on the assumption reduced oil prices will last well into next year, and further reductions in 2009 based on the fact the energy companies were effectively borrowing from the future continued low oil price to subsidise the reductions over this (possibly much colder than any in recent years) winter.

littletommytucker

Everytime British Gas increase/decrease prices, they intoduce a new "Click Energy" tariff, Currently "Click Energy 6"

Today at work, I notice they have started taking the neccesary measures to allow a "Click Energy 7" tariff on our software. The rates arent visable as of yet, but a sure enough sign that something is in the pipework..... watch this space!?

1carminestocky

littletommytucker wrote: »

Everytime British Gas increase/decrease prices, they intoduce a new "Click Energy" tariff, Currently "Click Energy 6"

Today at work, I notice they have started taking the neccesary measures to allow a "Click Energy 7" tariff on our software. The rates arent visable as of yet, but a sure enough sign that something is in the pipework..... watch this space!?

A disgustingly cynical business pratcice that should NEVER have been allowed to happen with a regulator who had the public's true interests at heart...

PrinceGaz

1carminestocky wrote: »

A disgustingly cynical business pratcice that should NEVER have been allowed to happen with a regulator who had the public's true interests at heart...

Privatising the power-companies in the first place was a move that never had the public's true interests at heart, only the short to medium-term greed from buying shares and watching them increase in value (and a big cash bonus for the government of the day which helped keep the economy stable, even if they were effectively selling off major assets). What was sold in the mid 80's under the Thatcher regime was staggering in both its size and importance to the country as a whole.

It's easy to look back with hindsight, but the 1980's tory policy of selling nationalised companies one by one to put money into the treasury and the new personal shareholders has to be the most blatant example of the government bribing the voting public to keep them in office.