wholesale cost v price rise.

pensioner2

I have noticed that the wholesale cost of gas has been falling for several months, so why the doom and gloom about increasing the price cap?

MWT

pensioner2 said:

I have noticed that the wholesale cost of gas has been falling for several months, so why the doom and gloom about increasing the price cap?

You are looking at the wrong prices, you need to look at the future pricing for the winter period not the day-ahead pricing.

pensioner2

Future pricing is a guesstimate.   Do the energy provides never buy fuel when the price is low?

MWT

pensioner2 said:

Future pricing is a guesstimate.   Do the energy provides never buy fuel when the price is low?

No, future price is an agreed contract for energy at a specified date and time, that is how the energy companies are able to set their fixed tariff prices and protect their ability to avoid short terms distortions in the market.

They do buy energy on the day ahead market when they have shortfalls or other unexpected demand, but a prudent supplier does not depend on those prices being reasonable, which is why those who were not prudent went into administration a few months ago...

The cap is set by Ofgem based on the pricing of those future contracts over a number of months, thus a prudent supplier will have had the opportunity to purchase energy at the price the cap is based on, thus giving them a fair chance to be able to trade successfully.

If they choose to roll the dice on the short term market then they are taking a risk that may cost them the company...

Uxb1

pensioner2 said:

Future pricing is a guesstimate.   Do the energy provides never buy fuel when the price is low?

Well they could but then they'd need to pay for it NOW and then store it.
firstly they ain't got the money - unless you would like to pay upfront now for all of your this year's winter's usage in one go!
Then there is the bigger problem of taking delivery and storing it all...errrr somewhere: which we in the UK have not got and actually no one has got storage for more than a week or so supply.
(Industry experts on here will know better the storage facilities in different countries)

One of the UK's recently closed storage facilities held just 9 days of supply when it was operational.

pochase

And that would be just gas storage.

You would need gigantic batteries to store just one day use of electricity, not even taking into account the loss by charging a battery.

pensioner2

Just checked the UK gas futures price to find that it has been falling like a stone.  Is it not possible to spread good news?   Perhaps it is bad news for those with a vested interest in pushing prices higher.
Another question.......Why are we being required to pay such high standing charges?       I wonder if supermarkets could get away with charging an entrance fee for letting us use their till to work out the bill.

MWT

pensioner2 said:

Just checked the UK gas futures price to find that it has been falling like a stone.  Is it not possible to spread good news?  

If you are seeing it 'fall like a stone' you are probably looking at July contracts.

Have a look at Q4 22, Q1 23 or Winter 22 contracts...

This is Winter22 right now...

QrizB

pensioner2 said:

Just checked the UK gas futures price to find that it has been falling like a stone.  Is it not possible to spread good news?

Join us brave souls on Octopus Tracker, and you too can enjoy all the fun of paying the spot price.

Alternatively, bask in the safety of a stable tariff and the knowledge that tomorrow's gas won't cost 2x what today's does.