Energy prices...

td53

td53

Well-known member
Here's what I don't get.

How do energy prices go up so much when we are drawing a lot of power from renewables and all tariffs, even those where you pay a premium for only renewable energy are affected.

I honestly don't understand why people aren't raging about this?

Yes, I understand gas/oil supplies are affected but wind, wave, nuclear, coal, biomass etc aren't and I don't think we need much oil in our power grid do we?

I am absolutely baffled. People explain shit about energy markets and it makes no sense to me at all.

It's like everyone has just shrugged and gone 'oh, ok, that thing has doubled in price' and the explanation is just a vague wave of the hand and someone going 'yeah, the economy and that' and we've all gone 'yeah, the economy, that'll be it'

Am I missing something?

*nb - it would be mad good, if we could not end up with a Brexit/not Brexit debate within 2 posts cos I'm genuinely confused and I'd like an explanation not just dickheads arguing through each other to make pathetic points cos they put a tick in a box 5 years ago but are acting on like they're warrior heroes from two ancient feuding tribal races when really they're just some people who have mostly the same desires and beliefs.
 
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It’s a rip off just like fuel is.

Over half the garages still haven’t even reduced the prices of fuel yet following the budget should now be 5p a litre cheaper following Sunak’s tax reduction on the fuel duty last week.

Robbing bar stewards the lot of them.
 
Jaffa_The_Hut said:
It’s a rip off just like fuel is.

Over half the garages still haven’t even reduced the prices of fuel yet following the budget should now be 5p a litre cheaper following Sunak’s tax reduction on the fuel duty last week.

Robbing bar stewards the lot of them.
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See, I have this naive sense that it must be something other than that because that's just shite, but I suspect you are likely right.

I read something about how the price of energy has only gone up because of a perception in the market that it will go up.

I can't even begin to unpack that in my head.

That's literally people heating their homes or cooking. What the fuck does 'a perception in the market' even mean?
 
td53 said:
See, I have this naive sense that it must be something other than that because that's just shite, but I suspect you are likely right.

I read something about how the price of energy has only gone up because of a perception in the market that it will go up.

I can't even begin to unpack that in my head.

That's literally people heating their homes or cooking. What the fuck does 'a perception in the market' even mean?
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Yer but we’re British we just accept all the shit that comes our way and get on with life as if nothing has happened.
 
td53 said:
Here's what I don't get.

How do energy prices go up so much when we are drawing a lot of power from renewables and all tariffs, even those where you pay a premium for only renewable energy are affected.

I honestly don't understand why people aren't raging about this?

Yes, I understand gas/oil supplies are affected but wind, wave, nuclear, coal, biomass etc aren't and I don't think we need much oil in our power grid do we?

I am absolutely baffled. People explain shit about energy markets and it makes no sense to me at all.

It's like everyone has just shrugged and gone 'oh, ok, that thing has doubled in price' and the explanation is just a vague wave of the hand and someone going 'yeah, the economy and that' and we've all gone 'yeah, the economy, that'll be it'

Am I missing something?

*nb - it would be mad good, if we could not end up with a Brexit/not Brexit debate within 2 posts cos I'm genuinely confused and I'd like an explanation not just dickheads arguing through each other to make pathetic points cos they put a tick in a box 5 years ago but are acting on like they're warrior heroes from two ancient feuding tribal races when really they're just some people who have mostly the same desires and beliefs.
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Supply and demand mate.

assuming 40% renewable now means a demand for 60% non-r. Supply has been restricted whilst demand, possibly increases at this time of year (even though it's bought in advance). And this is across all nations.

I suppose the counter question is just how high would domestic bills be without that 40% renewable.

And then there's profits- easy profits.
 
fcblackpool said:
Supply and demand mate.

assuming 40% renewable now means a demand for 60% non-r. Supply has been restricted whilst demand, possibly increases at this time of year (even though it's bought in advance). And this is across all nations.

I suppose the counter question is just how high would domestic bills be without that 40% renewable.

And then there's profits- easy profits.
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As I understand it, the costs of the enerhy suppliers hasn't changed anywhere in the chain.

Gas is not more expensive to get out the ground. It's not more expensive to pump to the shore. It's not more expensive to process or burn or whatever. There's just less of it.

So why is it more expensive? Who is profiteering? Is it the energy companies that deal with our bills or the people who supply them or both?

This is a very naive question but if there's not enough gas and the UK suppliers pay top whack to ensure supply, does that effectively mean that somewhere else, let's say for sake of argument Albania, end up with no gas?
 
As I see it Gas and Oil prices are nearly always on a bit of a rollercoaster ride, and market speculators drive it higher up and lower down the Big Dipper as they see it’s likely moves ahead.
Recently new supply sources like US shale and Canadian Tar Sands started to drive down prices. The OPEC cartel, who produce much more cheaply, initially decided to allow prices to continue to drop by not reducing their supply to try to reduce the new suppliers impact on prices and to attempt to drive down their market share.
Covid hit. The oil and gas prices crashed, and even briefly went negative, I think. Economies then recovered, the big suppliers didn’t immediately increase supply, prices spiked and kept going up afterwards.
Not sure if this is a fair representation of events at all. Just how I remember it.
 
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If you pay by monthly direct debit.

With the price cap rising from tomorrow,im sending in a meter reading today (31st March) to draw a line at the point the price cap changes. I want to be sure im paying the lower rate for all the energy ive used so far.
 
Fuel prices are just another example of where the consumer in a market that is not exactly free, get hammered.
Pricing on fuel goes up quick and down slowly. Just the same as when the B of E drops base rate for interest, it takes a few months for that drop to be passed on. If B of E increases base rate interest rates, the letter is on your mat within weeks of an increase.
 
Wizaard said:
The Chairman of BP(?), or one of the like has said they have that much unexpected profits, they don't know what to do with it.

Think the answer is right there.
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That is a coded way of saying that they will not cause problems if a windfall tax is levied.
The government should also force them, through legislation, to invest a larger portion of profits in green technology development, I know that they do this but becoming self sufficient in energy is now clearly more of a priority.
 
Morrisons put their petrol up in price since yesterday in Cleveleys.

The cap on domestic fuel is going up again in October so prices will rise even further in six months’ time
 
td53 said:
Here's what I don't get.

How do energy prices go up so much when we are drawing a lot of power from renewables and all tariffs, even those where you pay a premium for only renewable energy are affected.

I honestly don't understand why people aren't raging about this?

Yes, I understand gas/oil supplies are affected but wind, wave, nuclear, coal, biomass etc aren't and I don't think we need much oil in our power grid do we?

I am absolutely baffled. People explain shit about energy markets and it makes no sense to me at all.

It's like everyone has just shrugged and gone 'oh, ok, that thing has doubled in price' and the explanation is just a vague wave of the hand and someone going 'yeah, the economy and that' and we've all gone 'yeah, the economy, that'll be it'

Am I missing something?

*nb - it would be mad good, if we could not end up with a Brexit/not Brexit debate within 2 posts cos I'm genuinely confused and I'd like an explanation not just dickheads arguing through each other to make pathetic points cos they put a tick in a box 5 years ago but are acting on like they're warrior heroes from two ancient feuding tribal races when really they're just some people who have mostly the same desires and beliefs.
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Granted its not completely up to date.

 
Get ya meter readings in today to your utility companies before they whack the prices up from midnight. Just done ours
 
Prices are set at the margin, if your energy generation is a mix of 50% renewables and 50% gas (but able to vary +/- 50%) then it's the cost of the gas generation that sets the price, and if gas is in short supply and is expensive then the renewables operators are laughing all the way to the bank.

In fact it's a bit more complicated because not all gas generators are the same, some are more efficient than others, as demand rises they start by firing up the newest, most efficient plants, but as demand continues to rise they have to use older, less efficient plants, so at peak demand the price is set by the cost of running an old 1980's OCGT plant, and at that point the other gas operators are coining it too.

Then you have to think about, coal, biomass etc, but that doesn't really add anything here.
 
Jaffa_The_Hut said:
It’s a rip off just like fuel is.

Over half the garages still haven’t even reduced the prices of fuel yet following the budget should now be 5p a litre cheaper following Sunak’s tax reduction on the fuel duty last week.

Robbing bar stewards the lot of them.
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Don't they claim that is old stock for which they have paid the original price before the price drop? Strange how the price seems to go up at the slightest chance though. I don't drive by the way, so I only have the comments by others to go on.
 
EagleDay said:
Don't they claim that is old stock for which they have paid the original price before the price drop? Strange how the price seems to go up at the slightest chance though. I don't drive by the way, so I only have the comments by others to go on.
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Can only speak for a particular garage near me (BP) I know they average 1-2 deliveries a week based on demand and I saw a tanker there on Monday afternoon and it’s now Thursday afternoon and the price is still the same as it was prior to Sunak’s 5p tax duty deduction last week.
It’s scandalous.
 
Russia supply nearly half our gas .They had already reduced production so Gas was going up anyway .With the war in Ukraine ,I would imagine it has been reduced again . The gas helps produce electricity ,so that has a shortage as well . If there is a shortage of something the price goes up ,like gold or diamonds. In respect to fuel at the pumps . Garages make little profit through petrol . So if you have stocked up your garage full of fuel at a top price ,then the government drop the price by 5p . You would have to sell your more expensive stock at the higher price or you lose money . You can only drop the price when you get your next delivery in.
 
WIZARD OF TANGERINE said:
Russia supply nearly half our gas .They had already reduced production so Gas was going up anyway .With the war in Ukraine ,I would imagine it has been reduced again . The gas helps produce electricity ,so that has a shortage as well . If there is a shortage of something the price goes up ,like gold or diamonds. In respect to fuel at the pumps . Garages make little profit through petrol . So if you have stocked up your garage full of fuel at a top price ,then the government drop the price by 5p . You would have to sell your more expensive stock at the higher price or you lose money . You can only drop the price when you get your next delivery in.
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This is untrue. Russia supplies about 3% of UK gas, we get most of our gas imports from Norway.
Other European countries like Germany and Italy are heavily reliant on Russian gas.

inews.co.uk

Where the UK gets its gas from as Russia threatens to cut Europe's supply

Oil and gas are Russia's key exports, and Western sanctions in response to Vladimir Putin's invasion of Ukraine are having a significant effect on its economy
inews.co.uk inews.co.uk
 
Put simply, the re-opening of economies, post-Covid lockdowns, meant an increased demand for fuel that the fossil-fuel providers responded to with rising prices. The markets have since responded to the Russo-Ukraine war with additional price increases, driven by both an actual and a future expectation of reduced supply. It is also the case that in the UK, the oil & gas giants are covering the potential for a windfall tax.
 
Lost Seasider said:
Prices are set at the margin, if your energy generation is a mix of 50% renewables and 50% gas (but able to vary +/- 50%) then it's the cost of the gas generation that sets the price, and if gas is in short supply and is expensive then the renewables operators are laughing all the way to the bank.

In fact it's a bit more complicated because not all gas generators are the same, some are more efficient than others, as demand rises they start by firing up the newest, most efficient plants, but as demand continues to rise they have to use older, less efficient plants, so at peak demand the price is set by the cost of running an old 1980's OCGT plant, and at that point the other gas operators are coining it too.

Then you have to think about, coal, biomass etc, but that doesn't really add anything here.
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But why tho. Why does gas set the price of renewables. That's what I don't get. I appreciate the explanation though!

Surely energy should be basically cost of generation (raw materials and maintenance etc + wages and cost to transport) divided by amount used?

I don't understand (and this is where I am naive as fuck) why you need a 'market' to collect wind!

I'm genuinely not being ideological in that. I get that markets work and it's too naive to say "all markets are bad" but it's when people explain mechanisms within markets that I start to get confused as to what the market actually is, as it seems less like a market and more like something very rule driven...
 
1966_and_all_that said:
Put simply, the re-opening of economies, post-Covid lockdowns, meant an increased demand for fuel that the fossil-fuel providers responded to with rising prices. The markets have since responded to the Russo-Ukraine war with additional price increases, driven by both an actual and a future expectation of reduced supply. It is also the case that in the UK, the oil & gas giants are covering the potential for a windfall tax.
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But if more people buy coca-cola that doesn't mean a price rise does it? Why does increased use = rising prices?

Is it just "cos we can"?
 
td53 said:
But if more people buy coca-cola that doesn't mean a price rise does it? Why does increased use = rising prices?

Is it just "cos we can"?
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The elasticity of demand for Coca Cola is for more lateral than that for oil/petrol. Meaning that a small shift in price for Cola will result in a big demand shift, whereas it doesn't for fuel.
 
td53 said:
But why tho. Why does gas set the price of renewables. That's what I don't get. I appreciate the explanation though!

Surely energy should be basically cost of generation (raw materials and maintenance etc + wages and cost to transport) divided by amount used?

I don't understand (and this is where I am naive as fuck) why you need a 'market' to collect wind!

I'm genuinely not being ideological in that. I get that markets work and it's too naive to say "all markets are bad" but it's when people explain mechanisms within markets that I start to get confused as to what the market actually is, as it seems less like a market and more like something very rule driven...
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I think this is a valid point.
Even if the gas elements of your bill increases if you’re part of the 100% renewable supplier that had to charge more vs low price hydro carbon electric supply - why should that price have changed right now and you have an increase bill?
 
td53 said:
But why tho. Why does gas set the price of renewables. That's what I don't get. I appreciate the explanation though!

Surely energy should be basically cost of generation (raw materials and maintenance etc + wages and cost to transport) divided by amount used?

I don't understand (and this is where I am naive as fuck) why you need a 'market' to collect wind!
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All electricity is alike, they're not selling "renewable electricity" or "gas electricity", they're selling electricity and can charge the market price however they generate it.
 
Lost Seasider said:
All electricity is alike, they're not selling "renewable electricity" or "gas electricity", they're selling electricity and can charge the market price however they generate it.
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Isn't the nature of a market though that prices shouldn't be fixed. Again, I'm being naive, perhaps deliberately so here, but isn't the point of a market that they should provide value, not charge a going rate (i.e. if I'm selling, say, slippers in an actual market, it is part of a market that another slipper salesperson can undercut me)

How is something with fixed prices actually a market in a meaningful sense?
 
1966_and_all_that said:
The elasticity of demand for Coca Cola is for more lateral than that for oil/petrol. Meaning that a small shift in price for Cola will result in a big demand shift, whereas it doesn't for fuel.
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Yeah, but doesn't that work the other way too. If a price change doesn't yield a demand shift, then why does a demand shift yield a price change. It still cost the same to make 1 oil or 1 wind or 1 gas doesn't it?

The price of production doesn't alter much if you are selling 10 oils or 10 winds or 10000 oils/winds.

In fact, for other goods, there are probably greater cost changes in fluctuating demands as supply chains are affected, where as energy has an a ready built supply network. You just pump more or less down the pipe or wire.
 
td53 said:
Yeah, but doesn't that work the other way too. If a price change doesn't yield a demand shift, then why does a demand shift yield a price change. It still cost the same to make 1 oil or 1 wind or 1 gas doesn't it?

The price of production doesn't alter much if you are selling 10 oils or 10 winds or 10000 oils/winds.

In fact, for other goods, there are probably greater cost changes in fluctuating demands as supply chains are affected, where as energy has an a ready built supply network. You just pump more or less down the pipe or wire.
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You've answered your own Q. When the world went into lockdown the price of oil slumped because demand slumped. Now that demand is rocketing, prices are taking off.
 
1966_and_all_that said:
You've answered your own Q. When the world went into lockdown the price of oil slumped because demand slumped. Now that demand is rocketing, prices are taking off.
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So the price of oil is fake? It's just a notional idea that rises or falls based on demand that has literally nothing to with cost?

Why are the prices so much higher than pre covid even though the demand isn't particularly greater than pre covid?
 
td53 said:
So the price of oil is fake? It's just a notional idea that rises or falls based on demand that has literally nothing to with cost?

Why are the prices so much higher than pre covid even though the demand isn't particularly greater than pre covid?
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Oil is hugely demand and supply sensitive, hence OPEC's destruction of world economies down the years.
 
1966_and_all_that said:
Oil is hugely demand and supply sensitive, hence OPEC's destruction of world economies down the years.
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Yeah, ok, but why? Why is it not just a fixed price. That's my point. I don't see why it goes up and down like that. It's just a raw ingredient. The only thing I can see affecting the price really is scarcity.

I don't understand why demand impacts it. It's not weather dependent, it's not a refined material dependent on the price of other goods. It's just there. (until it runs short....)

Does price go up to regulate demand or simply to make profit?
 
All commodities are market priced depending upon supply and demand.
You will see that soon in the price of a loaf of bread based on the market price of wheat (Ukraine used to supply ca 40% of Europe’s use).
 
WIZARD OF TANGERINE said:
Russia supply nearly half our gas .They had already reduced production so Gas was going up anyway .With the war in Ukraine ,I would imagine it has been reduced again . The gas helps produce electricity ,so that has a shortage as well . If there is a shortage of something the price goes up ,like gold or diamonds. In respect to fuel at the pumps . Garages make little profit through petrol . So if you have stocked up your garage full of fuel at a top price ,then the government drop the price by 5p . You would have to sell your more expensive stock at the higher price or you lose money . You can only drop the price when you get your next delivery in.
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No they don't. 6%
 
td53 said:
Isn't the nature of a market though that prices shouldn't be fixed. Again, I'm being naive, perhaps deliberately so here, but isn't the point of a market that they should provide value, not charge a going rate (i.e. if I'm selling, say, slippers in an actual market, it is part of a market that another slipper salesperson can undercut me)

How is something with fixed prices actually a market in a meaningful sense?
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Wasn't there something about the companies themselves 'price-fixing' some years ago to keep the price artificially high?
 
EagleDay said:
Wasn't there something about the companies themselves 'price-fixing' some years ago to keep the price artificially high?
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I think there was.

I'm genuinely not being deliberately dumb, but my grasp of 'a market' is that it allows freedom of competition and encourages efficiency in theory.

I don't understand how having all the prices fixed and linked together and all the companies raising them as one, including raising their standing charges so you get hit, simply for having the service, before you've even used it, fits the definition of 'a market' as I understand it.
 
td53 said:
Yeah, ok, but why? Why is it not just a fixed price. That's my point. I don't see why it goes up and down like that. It's just a raw ingredient. The only thing I can see affecting the price really is scarcity.

I don't understand why demand impacts it. It's not weather dependent, it's not a refined material dependent on the price of other goods. It's just there. (until it runs short....)

Does price go up to regulate demand or simply to make profit?
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The availability of oil is strictly controlled by the cartel that is OPEC. By restricting supply they can force the price up. Likewise, by releasing huge quantities at once they can cause the price to fall. In that respect, and because demand is so inelastic, OPEC is a major player in (primarily) Middle-East politics.
 
1966_and_all_that said:
The availability of oil is strictly controlled by the cartel that is OPEC. By restricting supply they can force the price up. Likewise, by releasing huge quantities at once they can cause the price to fall. In that respect, and because demand is so inelastic, OPEC is a major player in (primarily) Middle-East politics.
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Ok, I get that.

But asfaik oil isn't a big factor in our energy tariffs is it?

Fuel prices, aye, of course.
 
td53 said:
Ok, I get that.

But asfaik oil isn't a big factor in our energy tariffs is it?

Fuel prices, aye, of course.
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Which brings us back to the potential limiting of supplies of gas from Russia. That and the huge price rise in the world wholesale market (post-lockdown) which has, in turn triggered a massive rise in the cap on retail prices.
 
Sooty59 said:
Yeah but this lot have got history & it's not good.
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Aye, I read summat about that. Kind of like the Glazers of public utilities it seems. Load with debt and break, whilst making loads of money themselves.
 
1966_and_all_that said:
Which brings us back to the potential limiting of supplies of gas from Russia. That and the huge price rise in the world wholesale market (post-lockdown) which has, in turn triggered a massive rise in the cap on retail prices.
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But only 6% of our energy comes from Russia and nuclear power, wind,wave, biomass etc are not Russian gas. So why is energy going up so much when most of it isn't from Russia?

And again, I literally don't get why the world market has gone up so much simply because if the end of lockdown. It's just a drop in use followed by a return to what it was.

I don't doubt what you say. It's what the news says.

But I don't understand it. I'm honestly not being willful - if prices had gone up say, 10 % - yeah, ok, I get that. There is a gas shortage in the offing. Ok.

Everything else isn't running short though. It's just as it was.
 
td53 said:
But only 6% of our energy comes from Russia and nuclear power, wind,wave, biomass etc are not Russian gas. So why is energy going up so much when most of it isn't from Russia?

And again, I literally don't get why the world market has gone up so much simply because if the end of lockdown. It's just a drop in use followed by a return to what it was.

I don't doubt what you say. It's what the news says.

But I don't understand it. I'm honestly not being willful - if prices had gone up say, 10 % - yeah, ok, I get that. There is a gas shortage in the offing. Ok.

Everything else isn't running short though. It's just as it was.
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Happy to be proven wrong, but didn’t OPEC belatedly cut supply after Covid hit and oil prices briefly went negative? Since then no increase in output, so when the global economy recovered then we get the first spike. Then the Russian invasion of Ukraine obviously.
 
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