Scottish power decide to raise their prices. All the other companies are going to follow. What happened to the idea that competition drove prices down?

(ernie to the forum, please).

It seems that the nettle nobody want to grasp is – poorer nations are getting richer, and buying stuff. Although a bit of war and a bit of natural disaster will always cause price spikes, people other than us old world honkys are buying food and fuel and driving the price up. How very dare they. I think we’re going to have to get comfortable with cost of things we need being significant.

What happened to the idea that competition drove prices down?

1) The UK energy market offerings are so complex it’s difficult to work out which deals are best. I believe they are being investigated by trading standards or some other body

2) The troubles in the Middle East are creating uncertainty of supply which is pushing world prices higher

3) The world’s energy needs are rising and supply is not able to keep up

4) People everywhere are wasting huge amounts of energy, and it’s not just cars

It’s historically proven that the only way to change people’s habits is to make it cost effective to do so. Therefore people will only stop wasting energy when they realise they can’t afford not to

They’ve all been keeping them down and coudn’t raise them without losing custom, once it becomes unsustainable for one company the rest will flollow.

With a monopoly they’d have gone up ages ago.

Wooly thinking alert.

Prices might be lower than they would have been without competition. Just because they are going up doesn’t mean they are artifically high…

Competition dose not mean prices can always go down. I don’t know the details behind this price rise but there is no reason why prices rises should not be a possibility.

How do real term energy prices compare now to when the companies where publicly owned?

This is what happens when a natural monopoly is privatised – Everyone needs gas/electric, there are only a few suppliers in the industry, it’s as easy as shooting fish in a barrel for the cartel.

Global supply and demand?
Cut your personal demand and cut your bills.

Increasing need for an ultimately limited resource, coupled to the fact there are other countries industrializing also requiring those resources?

Add to that:

This is what happens when a natural monopoly is privatised – Everyone needs gas/electric, there are only a few suppliers in the industry, it’s as easy as shooting fish in a barrel for the cartel.

Yes, our own special brand of lunacy.

I still can’t work out why water was privatised. Its not as if I could suddenly choose to buy it from anywhere else. It’s just a monopoly transferred into private hands.

Anything there is only one of shouldn’t be privatised. Allow electricity companies to pump power into the grid but keep the grid itself public. Same with gas pipes.

I still can’t work out why water was privatised

To make the govt’s books look good, obviously!

I reckon anything essential to life and the functioning of the economy should not be in private hands. Transport, water, power etc. Arguably food production too 🙂

I reckon anything essential to life and the functioning of the economy should not be in private hands. Transport, water, power etc. Arguably food production too

And all the associated inefficiencies?

What happened to the idea that competition drove prices down?

It was nothing more than a nice bit of propaganda by your favourite auntie and her lot, to make themselves and their cronies rich by selling off all public assets.

Oh look, people believed it…

I reckon anything essential to life … should not be in private hands

STW to be taken over by the state 😉

Transport, water, power etc. Arguably food production too

Well, just a hand full of companies control the majority of our food supply, not just the shops but the whole supply chain from the field to the till. The farms around me are owned and operated by Morrisons for instance. So we’ve reached a position where our supermarkets have moved from being grocers to effectively being utilities companies.

Privatisation brings in its own inefficiencies – pipes don’t get mended, infrastructure not upgraded etc because the company must protect its profits.

In an (well my) ideal world utilities would all be owned by public bodies, with any profits plowed back in to maintain and upgrade the infrastructure…..hah what a dreamer 🙂

But monopolies stifle innovation?! Not necessarily. A great example of a public body driving innovation is the Korean broadband revolution – Koreans are expected to get 1Gbps links to their homes this year. Broadband penetration rates are the highest in the world, and so are the speeds. This was only achievable because the revolution was government-backed.

We are unlikely to ever achieve this level of innovation in the UK because the infrastructure rollout is too expensive – even BT can’t afford to blanket-fibre the whole country, and even if they did, they would be forced to open up the network to resellers.

Privatisation brings in its own inefficiencies – pipes don’t get mended, infrastructure not upgraded etc because the company must protect its profits.

That’s thatcherism and not a privatised company, you’ve gone from one extreme to the other without having a fag break in the middle ground.

don simon where do you think we are now? Do you live in the 1980s?

The issue I have is nothing to with with price rises due to global demand – this obviously has to happen.

No, I get pissed off when domestic prices promptly follow any increase in global prices, but have a significant time-lag when global prices fall again. This is what needs investigating.

As a wise man once said, “We’re all doomed!”

Now if people would stop breeding and over-populating the place things might calm down a bit, but hands up all the parents on this thread…

don simon where do you think we are now? Do you live in the 1980s?

No, in Spain. Why? What’s happening?

In an (well my) ideal world utilities would all be owned by public bodies, with any profits plowed back in to maintain and upgrade the infrastructure….

Yup. That’s my take on it. Profits back in to make the services more economical and more efficient. Simple things like the govt. being able to provide energy supplies to low wage / unemployed direct without the power company profiting so the net cost to the rest of the public is reduced.

Same with the rail and mail etc.

The infrastructure of this country should never have been sold off.

Let’s all make money and not worry about the future!

[video]http://www.youtube.com/watch?v=nedVpG-GjkE[/video]

one_happy_hippy: agreed – also if a body representing the whole country were in the market to purchase energy, they could drive the purchase cost right down due to simple market bid economics – everyone wins!

The Korean broadband example isn’t really about innovation but a country adopting technology that already exists. In my mind it’s about the Korean Gov’t recognising what it’s population might need for it to be competitive on a global basis.

And all the associated inefficiencies?

Don, privatising to solve inefficiency is throwing the baby out with the bathwater imo. Given a bit of thought public sector could easily be made more efficient. Theoretically much more efficient than the private I reckon, due to the fact that profits do not need to be creamed off by shareholders.

No, I get pissed off when domestic prices promptly follow any increase in global prices, but have a significant time-lag when global prices fall again. This is what needs investigating.

AAARRRGGGGHHHHHH, sorry but this attitude REALY annoys me as it show just how little people know about the energy market. Do you actually follow the wholesale gas market price all the time or do you just pay attention to it when the domestic price goes up? If that is what you are doing and using that as the basis for your analysis then it will be flawed. It simply isn’t that simple as energy isn’t bought at a single price, it is bought in advance at a variety of different prices depending on how that particular company does its hedging. This is generally a good thing for consumers as it tends to flatten out the price making budgeting for the average person much easier.

Martin Lewis made an interesting point yesterday. Since privatisation there has never been an example of one major energy company raising prices without every other one immediately following suit, by exactly the same rate.

That isn’t competition. That’s a cartel. Which under European competition law is apparently illegal.

I await seeing the executives of the energy companies in the dock shortly. Oh… hang on a minute….

That isn’t competition. That’s a cartel.

Actually it’s an oligopoly. The same sort of thing that happens with retail petrol prices

Cost of crude is level and steady at ~75$ a barrel, significantly lower (25%+) than 2008/2009 when we saw price hikes of car and house fuel. You don’t see them coming back down do you? Could be due to them giving the fuel a false low back then, but I doubt it.

Oooh get you with your economics terms… still not sure what topiary has got to do with fuel prices though 😉

At least with oil prices, OPEC has the decency to actually unashamedly refer to itself as a cartel

Instead we get this flagrant cobblers about this wonderful ‘consumer choice’ that our glorious capitalist system has delivered. If I’m being bent over, I could do with being credited with some intelligence, and not being told I’m somehow benefiting from the experience

The majority of UK energy is bought from abroad, at least 6 months in advance, as a nation we produce relatively little energy and what we do cost mire and more to extract.

Cost of crude is level and steady at ~75$ a barrel

Err where are you able to buy crude at $75. The spot price for Brent Crude at the moment is $115 some 53% higher than your price. That’s quite a tidy profit you could make there.

Its similar to retail petrol prices, every supplier is exposed to the same ‘spot’ market price. But some hedge forward longer than others.

To the point above about the price not falling there are 2 things, 1 is that sometimes they do and the other is that wholesale prices are generally trending up, and for some period of time energy is effectively sold at a loss until the time is right to make an increase so profits can be made for the rest of the year. So what you see at the retail end is the trend rather than the movement in spot prices.

It is not a cartel, but given the suppliers are broadly exposed to the same commodity cost then they are going to take broadly similar pricing decisions and take the lead from the first in the pack. If say Eon had raised their prices by 12% 4 months ago they would have spend 4 months haemorrhaging customers – doesn’t make sense does it.

Another thing to say is that the UK has one of the lowest retail prices in Europe for gas and power, I have a graph somewhere but can’t find it right now.

Next to take into account is that profits on UK production of Gas are taxed at 81%! Don’t forget suppliers have to invest in future generation, supply and infrastructure as well as several costly commitments mandated by government, namely roll out of smart meters and the green agenda.

Lastly despite big headline figures these businesses are single digit margin ones, look at your food shopping, your travel and your housing and ask yourself if the margains earned compared to the investment required in future and the tax burden make these prices ‘unfair?

The question I have is, are edf and the other foreign owners putting up prices in their home markets to similar levels to those in the uk.

They already have higher prices anyway, different supply mix, different tax rates so the question is a lot more complex than you think

Err where are you able to buy crude at $75. The spot price for Brent Crude at the moment is $115 some 53% higher than your price. That’s quite a tidy profit you could make there.

Brent crude is, but plenty of other crudes are not!

AdamW – Member
I still can’t work out why water was privatised. Its not as if I could suddenly choose to buy it from anywhere else. It’s just a monopoly transferred into private hands.

simple, it was to allow financing of all the environmental improvements that were needed such as sewage treatment and the improvement of water quality

The Scotish Regulator has just pointed out that the Scotish Executive hasn’t provided the necessary funding for their five year programme of investment and the current situation in NI is due to historic low investment.

There are a myriad of regulators who impact the water industry, the model isn’t perfect but it’s better than what was there before

Brent crude is ($115/barrel), but plenty of other crudes are not!

almost certainly low-grade crap that’ll need loads of expensive processing. And or doesn’t contain the usefull valuable goodies.

not all crude oil is the same.