Gas Prices

[big fat yorkshire pudding]

Energy Companies should be re nationalised simple as that

Which will do little to solve the problem just shifts it in to one provider paid for by the taxpayer.

[albie]

No Pud, that is not correct.

It removes rent seeking from the economics of provision, allows forward planning for the industry as a whole on the basis of economies of scale, and clarifies the relationship between the main actors in moving the energy industry on to sustainable goals.

I doubt that you will find a credible energy economist to agree with the point you make.

[BillyStubbsTears]

Whether or not there are economies to be made by nationalisation is entirely a secondary point.

What Govt should be doing is what it should ALWAYS do when there is a massive, temporary shock to the economy. It should put large amounts of money into the economy to smooth over the effect. And it shouldn't do that by taxing it from taxes. It should borrow at the still historically low rates that it can do, and settle the debt by moderate inflation over decades.

Offering £150 to 80% of the population when bills are going up by 4,6 or ten times that amount is nowhere remotely close to being enough. There are millions of people who were already teetering on the edge of poverty and this is going to tip them over. There are many more millions who are going to be pushed towards that edge.

And that is all on top of inflation being at its highest, and real wages set to fall their steepest since Billy Bremner was our manager. I've been saying for months that 2022 was going to be a horrific year for the Govt's popularity and this is what I meant.

The Govt response suggests that they simply don't get this. But people I'm speaking to get it, even ones in relatively well paid jobs. This has the danger of becoming this Govt's Poll Tax if they don't take much more aggressive steps to shield people from these effects.


One last thought. Last time we had a spike in energy costs and a dramatic rise in inflation like this, a lot of the workforce were still unionised and could fight for higher wages to compensate. We don't have that situation now. The workforce is fragmented and powerless. So ordinary people are going to be exposed to the full force rampant inflation with no simple way of fighting for a raise in their wages for the first time in decades. That is a recipe for mass discontent.

[River Don]

It makes me grimace when I hear talking heads saying "well interest rates will have to go up, or there will be secondary wage inflation that will lead to a 1970s inflation spiral.

That is simply not going to happen, the lower paid have virtually no leverage anymore. Wages aren't keeping up with prices and won't keep up with the price rises.

What will happen is demand will fall out of the economy as prices for just about everything go up. That will lead to a secondary hit of closures and redundancies.

[rich1471]

What happens in October when prices are expected to rise again by £400-£700 per year, this is when again it will cripple people when the cold weather hits , I just don't think the government get how much people will struggle , as from April people will have higher national insurance,fuel and mortgage payments.

[River Don]

...and higher food bills rich.

...and higher everything else bills. For instance, they were making the point in the inflation figures how much the cost of building materials were going up.

[Nudga]

"you'll own nothing, but you'll be happy"

[albie]

BST,

"Whether or not there are economies to be made by nationalisation is entirely a secondary point."

Most definitely not!

There is not a crisis in ENERGY prices, there is a massive rise in wholesale gas prices.
The objective is therefore to hedge gas supplies in the mid term, and replace gas in the energy economy at the earliest date.

The ownership of the industry is central to that transition.
Trying to micro manage the disparate energy industry is about as rational as herding cats.

The only realistic way to create the new energy economy is from the position of controlling the investment and policy environment in the sector.

We have seen many providers go to the wall because they were gaming the existing system, without any long term overview of where the sector needs to be in 2030 and beyond.

Plenty of info on this topic if you investigate.

On the inflation point, you argued on here against wage increases as advocated by trade unions and Andy Mcdonald. With the latest forecast showing 7.25% inflation, the levels of wage increases that you supported looks like a poor choice!

[River Don]

Albie,

Gas prices are extraordinarily high but crude oil prices are rising too.

When fossil fuel prices are so high shouldn't that be a massive green light to the renewable energy business? Shouldn't the market just take care of the transition away from fossil fuels anyway  now?

[albie]

RD,

They will do whatever gives them the highest margin of return.

The issue is that a sector heavily embedded in the existing network will sweat that asset.
Basically, it is a Kodak moment.....the need for change is clear, but the inertia in the system prevents it. Kodak knew that smartphone cameras would undermine their core business, but could not move from the status quo.

We have an energy system which evolved in the last century.
The new energy economy looks nothing like the incumbent.

Politicians of all stripes have not understood this change, and revert to defaults at every prompt.
There is no chance of evading fuel poverty for many by tinkering with the old system IMO.

[River Don]

Yeah but Kodak went out of business and was replaced by the new camera technology.

Shouldn't the same be happening here and renewables be taken up naturally? Or are they still not out competing fossil fuel based technologies even at these prices?

[wilts rover]

We had no choice said Sunak allowing a price rise of 50%.

Shell announced profits of £20 billion this morning (£900 a second) with £6 billion to be given to shareholders.

The French government announched 3 weeks ago it will limit EDF's price rise to 4%, which will cost that company c£7 billion.

One country looks after its population. The other looks after its shareholders.

[River Don]

Personally I think the government should be launching massive support scheme  to insulate Britain over the summer.

[BillyStubbsTears]

Albie.

1) You're not going to change the basic cause of gas prices spiking and therefore the immediate crisis (global supply outstripping demand) by nationalisation.

2) When MacDonald was calling for 15% pay rises, inflation was below 2%. As a great man once said, when the facts change I change my opinion. What do you do?

[Filo]

A nationalised energy industry, could be delivered at cost without the need to generate £20b profits and greedy shareholders wanting dividends, this is all the legacy of Thatcher and her let the markets decide, we are being ripped off by foreign companies and its been allowed to happen. Those companies that saw no profit have stopped trading in the energy markets

[SydneyRover]

The anti climate change action government in Oz tried to blame every problem of the power generation industry on green energy, grid failures, price rises, you name it and tried every which way to stifle growth in the solar energy industry. We now have falling electricity prices.

https://www.abc.net.au/news/science/2021-12-03/solar-power-how-cheap-will-it-get-household-electricity-bill/100664690

[River Don]

The anti climate change action government in Oz tried to blame every problem of the power generation industry on green energy, grid failures, price rises, you name it and tried every which way to stifle growth in the solar energy industry. We now have falling electricity prices.

https://www.abc.net.au/news/science/2021-12-03/solar-power-how-cheap-will-it-get-household-electricity-bill/100664690

"After a long decade of year-on-year increases in power prices throughout the country, the cost of electricity is forecast to fall in most places.

Not yet you don't. According to that article, it is forecast but at the moment there is cheap electricity intermittently. There still lies the bugbear with renewables, overcoming intermitancy still tends to be expensive.

In a dark Northern European winter it's that intermitancy that is the big challenge.

These very high energy prices should provide the incentive but the need is now urgent.

[SydneyRover]

The world will move away from large generating centres to smaller localised units. This will help isolated towns and villages who will have their own generation sites and battery storage to help in times of greater need. The faster this is done the sooner the rewards will come.

[River Don]

...battery storage. How much is that going to cost?

[SydneyRover]

You have to look at the cost of not doing it, and that is limitless. All new developments should have earth sourced heating to reduce the load have solar panels and should be insulated to a high standard. And set about sorting the old housing stock.

[albie]

BST,

1) That is not the point of public ownership here.

You take the production sector into public ownership to make sure that the policy and infrastructure investment is directed to the objectives of the low carbon economy, without delay.

This is aimed at avoiding resources being expended on the legacy fossil based energy economy, with speed of transition being the goal. By-passing the inertia of the incumbents is central to that transfer.

The suppliers (your gas company) just buy in on the wholesale markets.
Public ownership allows for much better terms at volume on the futures markets, and takes the % to shareholders back into the expansion of capacity.

2) Well, we knew that at the time, didn't we?

The forecasts were for increasing inflation rates from the Bank of England, and the smart money in the markets were well in advance of the BoE.

You were so focussed upon backing up the lamentable Starmer and Reeves that you disregarded the evidence in plain sight.

RD,

Intermittency is not a major problem to the grid, declining over time.
Electric vehicles act as a balancing reserve, with a 2 way transfer enabled. (so called Vehicle to Grid, or VtG).

The rapid progress of battery chemistry has changed the renewables economy for the better.
The issue that we face is that those who invest in the production capacity for electrification are, in many cases, seperate from the sellers of utility services to the public.

In a nutshell, the more links that you have in the extended supply chain, the greater the leakage of capital to rent seekers looking for a premium. As these organisations add zero value, quite why we keep them in the loop is a mystery.....unless you are in hock to the ideology of prvatisation.

Sydney is right on this.
Decentralisation will have an increasing role to play.

How best to enable the change is the question?

[River Don]

Intermittency is not a major problem to the grid?

It certainly is at the moment, with low wind levels and back up provided by very expensive natural gas.

Ground source heating, high insulation levels, widespread electric car ownership, new battery chemistry. All these things are off into the future. They aren't with us right now. The problem we are facing is now. It's this winter, next winter and the winters after that.

[albie]

RD,

Has the National Grid said that intermittency is a big problem?
I may have missed it if so, is there a link?

I am not saying that there is no immediate problem with wholesale prices....there is!
The measures proposed kick the can a little down the road, but do not address the fuel poverty impacts.

Now you can take the current architecture of the energy industry as a given, and seek to tweak in the short term, or you can address the need for structural reform head on.

I favour the latter, because it needed to happen anyway, irrespective of volatility in wholesale markets.

Continuing a dependence upon spot market pricing is a recipe for instability of supply. The UK has reduced gas storage capacity in 2017.

Secure mid to long term gas supply by purchase as a state body, and re-organise the local supply network on a not for profit basis is the best way forward IMO.

If you are interested in the discussion, this link might be helpful;
https://www.carbonbrief.org/analysis-cutting-the-green-crap-has-added-2-5bn-to-uk-energy-bills

As to the future, it is nearer than you think.
All the technologies are available now.

Yes, take up will take time....all the more reason to start as soon as possible.

[BillyStubbsTears]

Very revealing moment yesterday.

The Governor of the Bank of England very publicly said that workers shouldn't ask for high wage rises as this would encourage more inflation.

He's technically right. But what he's doing is expecting workers to take all the pain of the current inflation.

But it doesn't have to be workers alone who take the pain.

What about asking companies not to increase their prices as a reaction to increased costs? How about containing inflation that way, and expecting companies to take some of the pain?

[normal rules]

All this and we live in a country where people are not allowed to erect their own wind powered generator in their garden.
Madness.

[selby]

  Shell have just come over to be a British registered company again because of the taxation situation in the EU and the Netherlands, meaning that company taxes will be paid in the UK.
   Now yes the profit declared is somewhat grotesque ( but was reported before taxes) but taxes will be paid in the UK, and over the last decade investment in our own gas fields in the North Sea has been declining as exploration has, those profits if they can be set against tax for exploration  and expansion could be better used by the company to eventually bring sustainable exports and energy supply and bring prices down.
   It is a highly skilled and paid industry, with an existing workforce in technical fields the country should be looking to exploit and  enlarge, not discourage the companies from being here. I never saw any posts on here in the last two years when these companies tanked.
   

[albie]

In 2017, the UK chose to decommission about 75% of gas storage capacity.

This policy choice meant that imports were basically on a just in time basis at spot market prices.
If you are using gas as a baseload fuel for other industrial and commercial processes, you become extremely vulnerable to price volatility.

So for now, we are in hock to Russian gas.
The only way out is source elsewhere while at the same time electrifying all end uses that can be transferred readily.

[normal rules]

  Shell have just come over to be a British registered company again because of the taxation situation in the EU and the Netherlands, meaning that company taxes will be paid in the UK.
   Now yes the profit declared is somewhat grotesque ( but was reported before taxes) but taxes will be paid in the UK, and over the last decade investment in our own gas fields in the North Sea has been declining as exploration has, those profits if they can be set against tax for exploration  and expansion could be better used by the company to eventually bring sustainable exports and energy supply and bring prices down.
   It is a highly skilled and paid industry, with an existing workforce in technical fields the country should be looking to exploit and  enlarge, not discourage the companies from being here. I never saw any posts on here in the last two years when these companies tanked.
   

Is this a brexit benefit?

[rich1471]

So the government gives people £150 of council tax if your in band A-D and today Doncaster council put it up £43 a year for band A and £65 for band B-D not really going to help at all is.

[drfchound]

Us poor buggers in band E get nowt.