Natural Gas Futures

[selectortone]

The price of natural gas has been falling dramatically on the world market in recent weeks. In fact it is now around half what it was 12 months ago, BEFORE the huge rises caused by the Ukraine invasion.

As I understand it, the energy companies buy their gas forward, by around 6-8 months. That means that the gas we consumers will be using in the autumn will be paid for by the energy companies at today's price.

So, in a sane world, we should actually be paying LESS for our gas in six months than were this time last year (c£1200/yr for an average household in Jan 2022). And yet, the energy companies are saying that 'due to external forces' the price won't be dropping by anything like that.

Something is not right here. Someone somewhere appears to be making an obscene amount of money. Or what am I missing?

 

[Dibs-h]

The price of natural gas has been falling dramatically on the world market in recent weeks. In fact it is now around half what it was 12 months ago, BEFORE the huge rises caused by the Ukraine invasion.

As I understand it, the energy companies buy their gas forward, by around 6-8 months. That means that the gas we consumers will be using in the autumn will have been paid for at today's prices.

So, in a sane world, we should actually be paying LESS for our gas in six months than were this time last year (c£1200/yr for an average household in Jan 2022). And yet, the energy companies are saying that 'due to external forces' the price won't be dropping by anything like that.

Something is not right here. Someone somewhere appears to be making an obscene amount of money. Or what am I missing?

You're not missing anything. Some out there are making obscene profits.

Sadly, once they get you hooked and dependent and able to tolerate higher prices, there's no incentive for them to decrease prices. You'd think it was the narco industry.

 

[Blackswanwood]

I’m not sure it’s as simple as it seems. However OFGEM did change the price cap mechanism to quarterly so they could more quickly reflect any fall in wholesale prices.

 

[John Brown]

Time for the 'n' word, perhaps?

 

[selectortone]

Time for the 'n' word, perhaps?

Nationalisation? If British Gas will be buying its gas in the autumn at today's price and planning to not pass that on to us then their morals are no better than Gazprom's. Perhaps nationalising is the only alternative with any thought for the consumer.

I read yesterday about the standby gas-fired stations that fire up at peak demand times. They are almost all foreign-owned, some by some very murky individuals, and can pretty much demand whatever price they like when they are needed. They also don't pay windfall taxes.

The whole energy industry is like the wild west the more I read about it. They do it to us because they can, with no conscience. Naked capitalism red in tooth and claw. What a world.

 

[Richard_C]

Have a look at marginal pricing, the way ofgem sets it's cap. Imagine you are a distributor of bread, and bread price is regulated by ofdough. If you bought 20 loaves, 19 of them at £1 and just 1 at £2, you could sell all 20 of them as if they had all cost £2. So even if most wholesale gas prices are falling, as long as there is a high priced forward contract somewhere and one generator keeps their prices up, then the cap on retail prices won't fall very much. You might then get some competition in the market, with a distributor breaking ranks and pricing below the cap, but pigs might also fly. The windfall tax is entirely justified because energy companies aren't profiting from great performance or reaping rewards from investment, they are profiting from a very broken regulatory system.

 

[ian33a]

The current pricing will establish a precedence from which gas and electricity pricing will be set for many years to come. The UK has dug such a massive hole of foreign dependency in chasing cheap prices and we are being blackmailed by those who sucked us in. We have little alternative energy sources that we can offer the population "right now" because we haven't sufficiently invested in their development. The model of little companies buying in bulk and running lean operations has been seen to fail and probably wont return in a hurry.

I don't see prices reducing massively any time soon. If they reduce at all, the politicians will capitalise upon the savings and hope that the majority of the population will have forgotten about the halcyon days of cheap energy in the past.

I suspect that those in power think that while there are plenty of people who simply cannot afford to heat there homes and buy food (and will be helped to some degree), there are a lot more people who can afford to heat their homes and buy food if they give up other spending habits and focus upon what is essential and not what could be considered as extravagant.

 

[Adam W.]

We got a huge rebate, in the thousands, and so did everyone else in Denmark. The gas companies got taken to task by the state because everyone was complaining about the profit they were making and how they were using their customers payments as their private piggy bank.

They also got a huge shock in January when they found out that people were using such little gas, quite funny really, as they are the ones struggling now, as they had to employ loads of new staff to handle the complaints and refunds.

 

[John Brown]

I can imagine a lot of people, including myself, being very angry if utility companies post huge profits. Quite what we can actually do remains to be seen, of course. The odd thing is that after many years of playing the traditional patriarchal role of thermo-stasi, my wife has now taken over the role with a ferocious enthusiasm.

 

[selectortone]

I don't see prices reducing massively any time soon.

I fear you are right. We see petrol and diesel prices go up and down (although we all know there's profiteering there too) but I've only ever seen gas and electricity prices go up.

We got a huge rebate, in the thousands, and so did everyone else in Denmark. The gas companies got taken to task by the state

Sounds like you have a government more focussed on its citizens and less in bed with big business.

In a civilised society utilities essential to life like gas and electric should be run for the benefit of users, not shareholders - and certainly not some dodgy billionaire owner based in Monaco or Switzerland.

 

[Spectric]

Perhaps nationalising is the only alternative with any thought for the consumer.

But what you save on the gas will be overshadowed by the higher company running cost, what is needed is something in the middle.

 

[selectortone]

But what you save on the gas will be overshadowed by the higher company running cost, what is needed is something in the middle.

I don't agree at all.

Copy and paste - I wrote this in another thread a while back:

Back in the 80s and 90s I worked for companies supplying process control equipment to heavy industries in the UK, including back then several that were state owned - electricity generation (CEGB), water and sewage treatment (the Water Authorities), British Gas at al. The people I met - process engineers, instrument engineers, control room operators, maintenance staff - were, by and large, conscientious and proud to be involved in the common good of providing essential services. When these industries started to be sold off the light went out of their eyes as the common good became secondary to the bottom line. Savage cuts, redundancies, questionable safety practices.

I have a good friend who was a supervisor at British Telecomm. I saw the light go out of his eyes after that was privatised. Someone please convince me that what we have now from BT is better than the old days.

Now, I'm no communist. I uderstand the benefits of the stock market and the implications that has on my pensions. But those essential industries are now top heavy with bean counters and admin people whose prime goal is to make a profit for their shareholders. Profit is the end product, not essential services. Fine, in a regulated stock market. But when you read about what went on before the 2008 crash - selling sub-prime mortgages to people who couldn't afford them, packageing up those mortgages into arcane instruments and selling them into the market, then betting on them to fail. Our essential services are now at the mercy of these people.

 

[Spectric]

I have a good friend who was a supervisor at British Telecomm. I saw the light go out of his eyes after that was privatised. Someone please convince me that what we have now from BT is better than the old days.

I doubt anything is better, many companies delivered more and gave a better service but at a higher running cost. What we need are nationalised companies with independant private management so you get the service and efficiency as to cost. I look back to the days of nationalised railways, when they had track gangs and a huge number of employee's that delivered a good transport system but at a high cost.

 

[selectortone]

I doubt anything is better, many companies delivered more and gave a better service but at a higher running cost.

Other countries in Europe have demonstrated that nationalised utilities can be run efficiently. I'd rather my gas and elec bills paid for that than they went to maintaining some oligarch's private yacht lifestyle.

 

[Phil Pascoe]

Someone please convince me that what we have now from BT is better than the old days.

We don't have to wait several months for a phone?

 

[Phil Pascoe]

Other countries in Europe have demonstrated that nationalised utilities can be run efficiently. I'd rather my gas and elec bills paid for that than they went to maintaining some oligarch's private yacht lifestyle.

Other Countries.

 

[niall Y]

What I do not understand about the denationalising of utility suppliers, is that foreign state owned companies were allowed to buy these businesses, So, if this this wasn't done in persuit of political ideology, was it simply the 'selling of the family silver' ?

 

[John Brown]

We don't have to wait several months for a phone?

I'm prepared to bet that some people in remote areas have to wait a lot longer than months.

About two years ago, all the roads in our village were dug up to lay fibre. Recently they've all been dug up again. Why? The company who did it two years ago didn't trench deeply enough, in some places they didn't trench at all. Apparently they weren't held to account over this because they went bust.

 

[John Brown]

Other Countries.

??? Are you suggesting that "countries" needs a capital 'C'?

 

[Phil Pascoe]

Just a typo.