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Re: Fracking

I mean no insult to anyone. I am merely reminded of Poe's law, that any sufficiently advanced parody of fundamentalism is indistinguishable from the real thing. Clearly I am too good at it and perhaps should consider giving up the day job to become a satirist.

Or if I was really sensible, I'd start a new religion in which inner peace/eternal life/karma is obtained by relieving yourself of all your worldly goods - in my direction.

Re: Fracking

JamesV: "The concept that price changes in line with changes in supply and demand is wrong."

There is actually quite a bit of truth in that sentence, and I'm not being ironic, in the context of the international natural gas market. There are two ways that gas is priced, one where it does change in line with supply and demand which is called "gas-on-gas competition", and another way where you just sell gas at a made-up price that is linked to the current price of oil. This article from the Economist magazine (note that Economist articles seem to go behind a paywall at some point) gives more details:


Gas-on-gas competition is used in the USA and was used when we were self-sufficient in North Sea gas in the UK. Gas prices went up in the UK from the mid-00s as soon as we started having to import a significant proportion of our gas and became exposed to the oil linked price system used in Europe by companies like Russia's Gazprom and Norway's Statoil.

I would imagine that if we had a lot of shale gas in the UK, and we were allowed by the Greenies to get it out of the ground, then we would go back to the cheaper gas pricing system we had before we started importing it. But I wouldn't underestimate the power of the Green lobby and their accomplices in the Westminster bubble to stop it being extracted or to make sure that if it is extracted, then it is sold at an exorbitant price.

I bought a paperback a few years ago by James Heartfield (one of the contributors to 'Spiked') called "Green Capitalism: manufacturing scarcity in an age of abundance" which I thought was a bit conspiracy theoryish. But the title of the book does seem to describe the behaviour of Tim Yeo regarding shale gas pretty well.

Brad: "I have met very few people though who could comprehend that Big Oil wasn't charging too much for gasoline. "The oil companies are raping us", they cry."

There's quite a bit of truth in the perception that Big Oil is overcharging, though it depends on how you define Big Oil. Some regard Big Oil as just being the the private enterprise sector, and I'd agree they're probably not overcharging that much. But if you think of Big Oil as being the entire global industry including the OPEC cartel, there is probably a lot of overcharging going on. One of the main functions of OPEC, as far as I can see, is to get the international price of oil as high as possible to earn export revenues for their countries, whilst oil is sold at a much lower price (but still above the production cost) within their own countries.

I remember Donald Trump made an attempt to be nominated as the Republican presidential candidate last year, before he crashed out over the Obama birth certificate issue, and one of the issues he was going to push if he became president was to take OPEC on, demanding that they adjust their production rates so that oil was priced at what he thought was a more realistic price of $40-$50 per barrel.


Re: Fracking

It would be nice to think that lower cost gas would result in lower prices to the consumer.
However there are two or three problems.
The first of ours is the EU and the greenies in our own government, especially those in positions such as on the Climate Change Committee and the Minister for the Dept Environment and Climate.
There is good reason to be concerned that they will not want us to gain from gas. They will seek to justify not passing on any benefits because it "isn't good for us or the climate".
They will eat up any advantage there might have been in taxes.
They may decide to treat this as a "windfall" and grab the lot.

Then too, we live in what Scott Adams calls a "Confusopoly". This is where despite not having a monopoly, the various providers use the confusion their different "packages" create to never actually enable people to compare prices or find a price break. They can never compare like with like. This means that if the Government or the greenies don't eat up all the benefits then providers will hang on to as much of the money as they can.

And of course, the government will not intervene nor will the useless quangos.

Re: Fracking

In reply to JMW, the Coalition government is doing something about the confusing system of multiple tariffs by the energy suppliers. In the forthcoming Energy bill there is a requirement that the energy suppliers offer only four tariffs each for gas and electricity, and have to put customers on the cheapest available price by summer 2014 at the latest. So if the confusopoly theory is the explanation for the high retail energy prices, we should find out in the next year or so.

There is a graph of how the UK retail natural gas price compares with the wholesale price available on this link:


The retail price just keeps going up and doesn't have very much to do with variation of the wholesale price, and the situation is similar for electricity.

The peak in the wholesale gas price in 2008 is due to natural gas being sold at an oil-linked price. If you look at graphs of how oil price has changed with time, you can see that the wholesale natural gas price has the same shape as the oil price curve, which also peaked in 2008.


If I had to guess why the retail price of natural gas and electricity in the UK keeps going up, I'd say it is most likely to be the cost of Green measures - in the case of electricity the Renewable Obligation subsidy, and in the case of natural gas it could be the cost of loft and cavity wall insulation schemes. I've noticed that since the Coalition government came into power the amount of 'cold-calling' I get from home insulation installers seems to have increased substantially.

Re: Fracking

If people are going to let themselves get screwed by sticking with their supplier and not even checking that supplier's tarrifs, frankly that is their lookout. But then as an old-fashioned liberal I'm as against government mollycoddling of consumers as I am against government regulation of pretty much anything - within reason of course.

In the early days of electricity privatisation, it was easy - your default local supplier was always the most expensive, because of customer inertia. You got stuck with the default supplier when you moved, so simply cancelled the contract and changed to anyone else at the earliest opportunity you had to get out of the default contract. I don't know what it is like now as I no longer live in the UK, but generally similar conditions apply here in Germany, where the domestic energy market is still in early stages, relative to the UK, of liberalisation.

All utility tarrifs boil down to two components - standing charge and charge for the quantity used. It's quite straightforward to work out which is the cheapest, there are even websites that will do it for you.

Here there is a complicating factor introduced by companies that will sell you cheap energy if you pay a year up front, but the "cheapness" only comes because you effectively pay a bond and get it refunded at the end of the year. (And at the end of the year, if you don't cancel in time you get stuck on a much more expensive tarrif for a minimum of one year.) Of course, these companies allegedly never repay the bond absent a court order, and they know most customers will not go to court. They also have a nasty habit of going bankrupt as they are so cheap they have to fund existing customers consumption by getting more customers - a Ponzi scheme in other words. There I can see a case for regulation.