Sunday 10 July 2011

Sunday, July 10, 2011 Posted by Jake 1 comment Labels: , , , , , ,
Posted by Jake on Sunday, July 10, 2011 with 1 comment | Labels: , , , , , ,

British Gas announcing a second price rise for the year, blaming increases in wholesale energy prices, brings to mind a classic scene from one of the great detective novels:

Gregory (a cop): "Is there any other point to which you would wish to draw my attention?"
Holmes:               "To the curious incident of the dog in the night-time."
Gregory:              "The dog did nothing in the night-time."
Holmes:               "That was the curious incident."

Sherlock Holmes, Victorian consulting detective, noted that the dog didn’t bark when the bad guy went past, deducing that the villain was friendly with the dog. Elegant stuff. I wish I’d written it – so I will.

OFGEM (a cop):“Is there any other point to which you would wish to draw my attention?”
Hari&Jake:          “To the curious movement of the wholesale gas price over the last couple of years
OFGEM:             [wiping drool from chin with elegant silk handkerchief] “The gas price has done nothing since it collapsed in 2008-09.”
Hari&Jake:          “That was the curious movement.”

Hari&Jake, Elizabethan cartooning bloggers, noting that the poodle didn’t bark when the bad guys hiked the cost of domestic energy bills, wonder whether the villains may possibly be friendly with the dog.

Everyone knows that the oil price has been very volatile for many years because of things like instability in foreign lands. Oil and Gas go together like Ripped-Off and Briton, right? The assumption is that as goes oil, there follows gas. After all, they are both made of decomposed prehistoric organic matter.

But, actually, the price of gas doesn't follow that of oil. Not even remotely. 

This chart from the Financial Times compares prices over one year. 

And the reality is, although the wholesale oil price is now nearly five times what it was ten years ago in 2001, the wholesale gas price is actually lower than it was in 2001!

But what of the price of oil, which has clearly shot up? Gas is gas, but electricity needs to be generated. Could the price of oil be pushing electricity bills up? 

Again, the answer is "no".

In the UK the great majority of electricity is generated by gas and coal. According to the Department of Energy and Climate Change (DECC), oil represents a tiny 2% of the fuels used to generate electricity for the UK domestic market. 

The data shows there is virtually no link between the wholesale price of oil or gas and UK household energy bills, except in the mendacity of the energy companies and the incomprehension of OFGEM.

The US Energy Information Administration provides data for domestic energy prices in various countries between 2001-2008, shown in the graph on the right. With all the earnest excuses from British Gas and chums, who claim international wholesale prices force them to put up their charges, countries other than the UK and Ireland have managed to raise prices much less. 

While electricity generation in France has a heavy reliance on nuclear power, the fuel mix for Spain is very close to the UK. And a gas supply is all gas.

A more complete set of data is available from the UK’s Office of National Statistics, showing the growth in domestic energy prices up to April 2011. Demonstrating that while the wholesale gas price has returned to below its 2001 level, domestic energy bills have continued to soar.

Life is full of surprises. But few come from the energy sector:
  • British Gas' claim that the 25% increase in domestic energy bills over the last year is due to soaring wholesale fuel prices is neither true nor surprising.
  • Thinking they could get away with it is even less surprising.
  • That they actually do seem to be getting away with it is least surprising of all. 
What would stop them? Get the evidence in front of as many people as possible - bloggers, tweeters, casual conversations, irate rants.

And when you've got that out of your system, browse our Liebrary for other things to really annoy you.

1 comment:

  1. Puzzling element in the nPower price rise announcement:

    "Wholesale energy prices have been impacted by events such as the tsunami and Fukushima in Japan, political changes in the Middle East, nuclear shut down in Germany."
    ***Prices go up because of recent events*****

    "Recent media coverage has reported that wholesale energy prices on the ‘Spot Market’ have fallen - this is correct. However, energy suppliers buy in advance, in some cases up to three years; they do not buy all their energy a day or a month ahead from when they require it. Therefore changes on the short term ‘spot market’ have very little impact. npower has already bought a significant proportion of its needs for customers to cover the coming winter period."
    *****Prices don't go down because recent events aren't relevant ******


Note: only a member of this blog may post a comment.

Share This

Follow Us

  • Subscribe via Email

Search Us