As gas prices fall for the gas companies who will start to reduces prices first and w

grizzly1911

I don't see prices coming down ever. I think they will stabilise and the big increase will reduce but worldwide consumption is going up and resource is finite even if there are untapped reserves.

Those in control of those reserves and brokers will ensure that supply is "strangled" to ensure prices are maintained.

I do not believe sellers of commodities so key to life would ever sell at a loss other than in the very short term. e.g. contract overlap or to get rid of perishable goods.

A lot of cost is loaded on the power companies to meet aspirational green targets. Some work others just chase spurious dreamed up targets - Times had an article on Carbon Offsetting last week.

They also have redevelopment costs for new infrastructure and new generation which should be amortised long term over decades but they are front loading in IMO. It is also arguable that this is a form of taxation by the back door.

The regulators have little control over them and don't understand them apparently:eek: hence the forensic accounting review going on now. The companies use smoke and mirrors to disguise/manipulate where profits are being made. They will claim losses on retail whilst making large profits selling the stuff from wholesale to retail arms. Should the regulator get some dentures then I believe politically a brake will be applied on the level of increases. By then the suppliers will have a banked many years of over the top increases anyway.

We are all paying the cost of competetion -don't forget the administration charges they carry for continuous marketing and switching processes as we constantly switch. This is just dead money and unnecessary.

In the UK we have little capacity for storage -buying gas cheaper in the summer for future supply. Can't remember the exact figures but the UK has less than 3 months storage capacity -not enough to get us through winter. Whilst Europe from where a lot of the companies operate can hold well over 6 months. They then sell it to us at peak prices when we need it.

The suppliers will also argue that is also the way they are being regulated. Spanish Power aka Scottish Power are that prices are much higher in Spain but that they are more stable and not subject to rampant increase.

:mad:

Pincher

Reserves cost money, you try to ask the Russians: "Can we have the gas now, and we'll pay you when we actually use it?".

Storage facility needs land, maintenance (technicians) and guards (theft, terrorism). Will the insurance pay out for terrorist bombing?

This reminds me of another asset that sits around doing nothing.
Remember Gordon Brown sold the family silver, well, Britain's gold reserve? "The Treasury achieved an average price of just $275.60 an ounce." The price of gold is around $2,000 an ounce now.

Gold price will eventually fall, so what if we sell some of the remaining gold now at $2,000 an ounce? Build secure underground gas storage facilities. I seem to remember the spot price for gas was NEGATIVE one or two years ago, so we top up the reserve whenever the spot price is cheap.

We can use this reserve in all kinds of ways. We can guarantee the spot price, so it never goes above a certain level. We buy and sell sterling to defend the currency, it's a similar thing.

In terms of holding non-interest bearing asset, there is a case for diversification anyway. Holding only gold is just eggs in one basket silly.

There is a case for holding shares in energy companies, using money from selling the gold, but we also need physical reserves of crude oil and gas.

bengasman

Biketrials08 wrote: »

Really they're not excuses.

Really, they are.
Every time the wholesale price goes up, the retail increase is both faster and higher than the correction when wholesale prices go down.
Same as diesel prices really. Barrel price has been about 50% higher than current, but the forecourt price is within pennies of all time high. Only difference with car fuel is the extra tax increases from those labour idiots that counts for part of the price.

older_wiser

a similar statment could be made about our north sea oil reserves if thatcher major hadn't bled our reserves dry it would be worth in the hundreds of billions taking todays prices. Easy to say in hindsight and criticise years in the future.

grahamc2003

grizzly1911 wrote: »

I
A lot of cost is loaded on the power companies to meet aspirational green targets. Some work others just chase spurious dreamed up targets - Times had an article on Carbon Offsetting last week.

They also have redevelopment costs for new infrastructure and new generation which should be amortised long term over decades but they are front loading in IMO. It is also arguable that this is a form of taxation by the back door.

The regulators have little control over them and don't understand them apparently:eek:
:mad:

While I agree that our energy bills now have very high and increasing 'green' and infrastructure costs (necessary to handle much of the 'green' generation in the case of electricity), I'm puzzled as to why you think the regulator doesn't understand this.

Just as the 'green' 'initiatives' are backed by this (and as far as I can tell, every) government, also the regulator operates within the framework the government decides. In fact, that's exactly why all the 'green' costs are allowed to be passed onto our bills - Ofgem allows it (no choice).

Another 'green' policy is itself higher energy prices per se, to reduce demand. That's why the regulator in reality can do (or even wants to do) anything about really rapidly rising increases, apart from the political imperative of appearing concerned. While the view presented to the public that there is great price competition which keeps prices low, everyone knows that is a pretty obvious sham, with the market being a cartel or oligopoly rather than a free market.

In the case of electricity, British Gas provided figures showing that only 30% of our bills are for their wholesale fuel costs, so aren't really geared much to raw energy prices, and more to 'green' costs, admin costs, and profits (which together make up 70% at the moment, more in the future). Much of the admin costs of suppliers these days are simply cost burdens of pretty useless processes to their central role, like supplier switching, dealing with queries and complaints, and inventing hundreds of complex tariffs designed purely to confuse the public, imv.

In the near future, our bills will additionally be loaded with infrastructure costs to be passed onto Nat Grid, who have to supply the wires to more and more remots and offshore windfarms, costing billions. There are also the costs of several new Nuclear power stations, whcih we simply do not have the option of not building, however many windfarms are built. Plenty more (unavoidable) billions there. Costs like solar power FITs will rise rapidly from now on - there's a downside to giving everyone who puts up solar panels £1500pa index linked, plus many similar schemes.

With all those factors, I can't see how anyone would expect our bills to drop whatever happens to raw energy prices. And furthermore, these are 'smokestack' industries where holding companies in general own the assets holding the energy resource, so if raw energy prices rise, they make higher profits there, then again further downstream from the suppliers. Energy companies gain twice by any world energy price rises.

I just struggle to see how energy bills will be affordable to most in say 10 years if things carry on as they are today. Basically, the policies are simply unaffordable or, more aptly, unsustainable.

To pre emt such a reply, I know one or two tariffs have recently come onto the market at a slightly lower cost than existing ones (after the recent very high price rises), but these are simply ephemeral marketing opportunities imv, and say nothing about the general trend in our household energy bills).

Biketrials08

bengasman wrote: »

Really, they are.
Every time the wholesale price goes up, the retail increase is both faster and higher than the correction when wholesale prices go down.
Same as diesel prices really. Barrel price has been about 50% higher than current, but the forecourt price is within pennies of all time high. Only difference with car fuel is the extra tax increases from those labour idiots that counts for part of the price.

No I'm reffering to the buying of forwards and futures not to the response to price changes.

grizzly1911

grahamc2003 wrote: »

I'm puzzled as to why you think the regulator doesn't understand this.

Sarcasm -hence "apparently" and :eek:

I agree with you they are a political animal put their to absorb the shock(excuse the pun). In the same way they have "launched a forensic examination" of the Companies accounting practices - it is just another delaying tactic to allow them (the energy companies) more time to plunder us.

I agree with you that power will become unaffordable in the future (that will not be the only commodity out of reach of many either). The fact that money is being pumped into FIT rather than more strategic central generation is short term stupidity - but that's just my opinion.;)

HalloweenJack

oil per barrel is now at a 2 year low - so where is the drop in pump prices? thats right - not happened - same with gas prices , yes its at a low now - and this is the price being paid for future contracts of supply , but the price wont go down - shareholders want returns you must understand....

chris1973

Interesting that 'This is Money' and also 'The Telegraph' have run stories covering the cost of Energy prices in the UK compared to some cheaper prices abroad.

Indeed a hop across the channel to France, will reveal that they have some of the lowest Energy prices in Europe, with only a 3 percent increase in their energy costs, compared to the levels we have been seeing over here. And even when prices do go up, they are usually in increments of less than 2%, how many percent increases have we seen here recently?

In fact, back in 2008, EDF who supplies customers on both sides of the channel increased prices in the UK by 22%, yet was only allowed to increase them in France by 5% during the same timeframe.

http://www.timesonline.co.uk/tol/money/consumer_affairs/article4474456.ece

The same article even hints that the UK prices may even be subsidising the French ones. So not only are we paying for people to have Solar Panels fitted, but also for the French to have lower bills!.

In fact, according to this report France isn't the only neighbour to introduce caps on Energy price increases, and once again the word 'subsidy' is mentioned.

http://www.mirror.co.uk/news/top-stories/2011/07/24/the-great-fuel-con-as-we-face-soaring-fuel-bills-customers-in-other-european-countries-get-their-prices-capped-115875-23291953/


So the question is, if France, Germany and Spain can cap a maximum rate of increases in Energy Prices, why doesn't the UK grow a pair and do the same?. Same supply companies, different countries, and the same stuff which Volta, Franklin and Faraday discovered so where is the weakest link and where is the reason for the increases?.

Maybe we need to start by owning our own supply and distribution companies!.

Biketrials08

Electricity supply in France is generally different to other european countries due to it's near 100% Nuclear generation which would result in a more stable electricity price. But, I don't doubt the Fench government would enforce a cap to rises.