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

macman

sscrabble said:

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  ?

You need to stop referring to 'energy companies' as a generic category. There are producers, distributors, and domestic and commercial suppliers, all distinctly separate, though some have interests in more than one sector.
The ones you contract with, the domestic suppliers, can make no more than 2% profit, which under the cap is £69.90pa. Less than £6 per month. And that's assuming they have bought forward for the next 4 months at a rate that allows them to make 2%. 
One cold week in winter and they are forced to buy on the spot market at vastly higher rates. Remember, we have virtually no capacity to store gas reserves for the winter, unlike our more farsighted European neighbours.

tteedd

The TV is full of reports as to how people cannot afford to pay their energy bills, but winter is not here yet, it is still summer.

Central banks all over the world are slowly putting up interest rates to squeeze out inflation (that governments have caused by printing money and the Ukraine war has exacerbated). My guess is that we will be in a full scale economic depression by early next year the demand for oil and gas will bottom and the prices will follow.

Economic depressions are a bad thing!

But this one will bring fuel prices down and remove Russia's income.

ossian

We are a net importer of gas.  We import gas from the continent.  If the price of the gas is pushed up by demand from continental countries because Russia is supplying less gas and at higher prices then we have to compete with what they are prepared to pay for gas.  We cannot escape the gas market and as supply is constrained then prices go up. 

Taxing gas "producers" makes the business case for investing in increased supply less attractive but that's a complicating factor and not the immediate problem today.

Nationalisation of gas producers won't increase supply or reduce the input costs.  Nationalisation of suppliers is just another method of "socialising" (i.e. spreading) the cost of the expensive gas that we will need to produce anyway.  If it happens I suspect as soon as this energy crisis is over a government will want to get rid of the gas companies as soon as it can because ultimately governments are unlikely to produce an efficient business and are more likely to misallocate capitol for political reasons and end up with highly unionised militant workers.  Others may see things differently.

Vegastare

So basically all these so called industry advisers and would be prime minsters are talking rubbish when they constantly say we should make ourselves more self sufficient on energy.

How do we achieve that if we cannot gain access to our own energy in the future at decent pricing

tteedd

Vegastare said:

So basically all these so called industry advisers and would be prime minsters are talking rubbish when they constantly say we should make ourselves more self sufficient on energy.

How do we achieve that if we cannot gain access to our own energy in the future at decent pricing

But at least all the profits would come to UK Ltd and no one would be able to turn of our supply. And I'm sure the legislation for exploration could allow for preferential pricing for the home country.

Vegastare

Exactly the point

dunstonh

So basically all these so called industry advisers and would be prime minsters are talking rubbish when they constantly say we should make ourselves more self sufficient on energy.

If we can generate enough of our own, then there will be a significant tax income from it.  It will also help our balance of payments as we export excess energy (as well as more tax income).   That can be be used in extreme cases to help soften the blow.

However, the main thing is to increase the supply.  The greater the supply, the lower the cost.

MattMattMattUK

tteedd said:

The TV is full of reports as to how people cannot afford to pay their energy bills, but winter is not here yet, it is still summer.

Central banks all over the world are slowly putting up interest rates to squeeze out inflation (that governments have caused by printing money and the Ukraine war has exacerbated). My guess is that we will be in a full scale economic depression by early next year the demand for oil and gas will bottom and the prices will follow.

Economic depressions are a bad thing!

But this one will bring fuel prices down and remove Russia's income.

Much of the weight behind raising interest rates is actually to prop up currencies, Sterling is particularly weak to that at the moment so the BoE has to keep up with the Fed and will need to carefully watch the ECB as they ramp up interest rates, if not we risk currency flight. 

adindas

Not if you see the global price of natural gas trading in the commodity market. The price could only much lower if it is heavily subsidised like many in the developing countries.

ProDave

The way the energy market works is clearly broken.  What is happening is we have say 80% of our needs available from plentiful and cheap sources at a fixed production cost.  but we need more.  That extra is the bit everyone is bidding for, the imported gas.  So I get that we have to bid the market price to get what we need of that.

But what is "wrong" is the majority, that has fixed production costs that have not risen, ALL gets paid for at the highest price.  So those companies which are still producing as much as they can at the same low price, are selling it much higher and making the massive profits that some are talking of "punishing" with windfall taxes.

Now that is the way the market is so you can't blame any of the energy companies for just doing what the market says.

What is needed is an open and honest discussion by politicians (an oxymoron?) about how to reform the energy market.

For instance, why can't we buy all the cheap domestic power, renewables, nuclear, even locally fired fossils fuel at an agreed "cost plus" price, so the producers make a profit, and only pay the higher market rate for the imported fuel to make up any shortfall?

That would no doubt need a nationalised market to make such a change.  Bring back the CEGB?

Why is there no politician of anyone even discussing the idea?

The market is broken.  the solution is not to think how can we subsidise prices in this broken market but to think how can we correct the market.