I don't understand the huge price increases when we are not reliant on Russia for gas

MrWrighty

Around 50% of our gas comes from the North Sea, some from Norway and the rest from other non EU countries. We only ever imported around 3% of our gas from Russia so how come, when we produce our own, we are at the mercy of the huge increases imposed by the energy cap. Add in the enormous profits being made by the energy companies something just does not add up.

[Deleted User]

Company X has a thing. You want to buy this thing.

You offer them £1 for the thing, but they have 20 other people offering them £5 for it.

Who are they going to sell it to?

Energy suppliers aren't making massive profits, that's why they've all been going bust over the last year.  Oil/gas extraction companies and trading companies seem to be doing alright (some of which are owned by the same 'parent' as the suppliers), but they're not under 'our' control.

cherryblossomzel

We don't exist in isolation, countries that did rely on Russia now have to get fuel elsewhere and so demand on those sources increase, and so do prices

jimexbox

Energy providers buy gas/electricity at market rates. They are most definitely not making huge profits on household energy. 

MrWrighty

Deleted_User said:

Company X has a thing. You want to buy this thing.

You offer them £1 for the thing, but they have 20 other people offering them £5 for it.

Who are they going to sell it to?

Energy suppliers aren't making massive profits, that's why they've all been going bust over the last year.  Oil/gas extraction companies and trading companies seem to be doing alright (some of which are owned by the same 'parent' as the suppliers), but they're not under 'our' control.

Its not the energy supplies making huge profits its the energy producers, BP, Shell etc. There must be huge tax income from these increased prices coming from the energy producers, that should be used to offset the cost. The government should force the companies to support this country first before seeing on at a huge profit.

Aylesbury_Duck

MrWrighty said:

Around 50% of our gas comes from the North Sea, some from Norway and the rest from other non EU countries. We only ever imported around 3% of our gas from Russia so how come, when we produce our own, we are at the mercy of the huge increases imposed by the energy cap. Add in the enormous profits being made by the energy companies something just does not add up.

That's not quite right.  The cap does what it says on the tin - it caps the rate, it doesn't 'impose a huge increase'.  If the cap wasn't applied, prices would be higher still.

Others have pointed out the flaws in your other assumptions.

[Deleted User]

MrWrighty said:

Its not the energy supplies making huge profits its the energy producers, BP, Shell etc. There must be huge tax income from these increased prices coming from the energy producers, that should be used to offset the cost. The government should force the companies to support this country first before seeing on at a huge profit.

There already was a windfall tax on these profits (from any of these companies UK arms), which is being used to subsidise the cost.

How would you suggest that we tax CNOOC or Saudi Aramco?

Would you also suggest that we should have subsidised the years in which they made a loss?

The government forcing companies to sell low is just a fast way to force companies out of the UK.

macman

To put it simply, the wholesale price is determined by the international market. The retail price is regulated by Ofgem under the price cap. If retailers cannot make a profit between the two, they go bust. You either subsidise the retailers to charge less, or subsidise the customers to pay less. We have gone for the latter option, France has gone for the former. The result is the same.
We are competing against every country in Europe to buy gas forward, particularly France and Germany, who don't have domestic sources of supply.

Section62

macman said:

To put it simply, the wholesale price is determined by the international market. The retail price is regulated by Ofgem under the price cap. If retailers cannot make a profit between the two, they go bust. You either subsidise the retailers to charge less, or subsidise the customers to pay less. We have gone for the latter option, France has gone for the former. The result is the same.

Except with the former option there is little to no incentive for consumers to use less, so demand remains high and maintains upward pressure on wholesale prices.

sscrabble

So it seems the energy companies are not making massive profits from these increases - maybe one billion they say - so who is ?  Are we being held to ransom by the likes of Saudi Arabia ?   Not accurate , but say 30,000,000 households in the UK paying £3,000 extra each - that is 90 billion EXTRA profit - and how much from business and industry another £210 billion ?   Who are we going to be giving maybe £300 billion to each year  ?

molerat

The current  problems started 40+ years ago when the government sold off our energy security, the North Sea oil and gas reserves, to the highest bidder to fund a low tax regime. This has been a policy supported by parties of all colours. A case of jam today and worry about tomorrow tomorrow. Unfortunately that has now come back to bite us on the bum.  Some states still control their energy reserves so their people get to enjoy low energy prices whilst the state benefits from the current global market price for exports.

Another problem is the energy pricing model being set against the highest cost method where the green generators are still being subsidised to produce energy that now costs less  than the other generating methods but are selling it to the grid at that same high price.