Lock down your Gas and Electricity prices now!

buglawton

I heard some analyst on Radio 4 saying that in 2 years' time we will be "have more gas than we know what to do with". So don't let's get panicked into paying high fees to "lock down" something that may not actually rise as much as you think!

Guessing if one will save money this way is a bit like playing at the Futures market. PS I'm wearing a nice woolly jumper with the thermostat at conservative 20 while I type this!

Cardew

buglawton wrote:

Guessing if one will save money this way is a bit like playing at the Futures market.

I am not sure that is a good analogy.

You can choose to go into the Futures market – and most of us do not.

We have no choice about using Gas & Electricity. Therefore we have to make the decision whether to go for a fixed price tariff or staying with a variable tariff. So we all have to take a gamble on which path to take, and there will be winners and losers.

I took the gamble on a fixed tariff, but do not profess to have anything other than a gut feeling that it might pay off; and would not necessarily recommend that course of action to anyone else.

However there seems to be a lot of people who apparently have a great deal of knowledge about future energy price trends. This appears to give them the confidence to recommend not taking a fixed tariff.

As stated before I will know in April 2010 if I made the right guess.

buglawton

I made the Futures analogy because a company that for example buys a lot of copper to make it's product, can buy futures in copper at a set price/date. If the price of copper rises radically, the co gets compensation via the value if the futures it bought, so enjoys a predictable raw material cost in effect.

The fixed deals us energy punters are offered are priced partly according to the futures market in energy. I wonder if any Money Saving Experts out there who know more about futures prices can tell if these locked energy price deals are value for money?

Cardew

buglawton wrote:

I made the Futures analogy because a company that for example buys a lot of copper to make it's product, can buy futures in copper at a set price/date. If the price of copper rises radically, the co gets compensation via the value if the futures it bought, so enjoys a predictable raw material cost in effect.

The fixed deals us energy punters are offered are priced partly according to the futures market in energy. I wonder if any Money Saving Experts out there who know more about futures prices can tell if these locked energy price deals are value for money?

I now see the point you were making on gas Futures, in fact I was reading an obscure financial publication about the gas producers manipulating the market by buying their own production to force up future prices.

I wouldn’t pretend to have more than a superficial knowledge of the Futures market but I understood that it was relatively small organisations(e.g. manufacturers) that would buy forward so they could guarantee their costs. I didn’t think that there were dealings in the sort of quantity, say, BG would need; especially for a long term that it would need to support a price freeze to April 2010. In fact the financial media have reported recently that gas producers have simply refused to put any gas on the Futures market.

It is pretty obvious that BG(and others) have their experts who considered the long term energy price trends before offering fixed term fixed tariffs. Equally clearly their judgement is that it would be commercially viable.

So in a way by taking a fixed tariff you are ‘betting’ against the experts. However these experts have been wrong many times over the past 30 years or so, when Middle East wars have played havoc with energy prices. The recent row over gas prices between Russia and the Ukraine has demonstrated how dependant Europe is on Gas and I wonder how Russia will use this position of strength.

For my part I quite like the thought that my prices are fixed for over 4 years, even though I readily concede it might have been the wrong decision.