Energy costs

Up until the 10pm BBC news last night (local time UK) I would have posted something similar to your post.

I was unaware that energy prices had been increasing relative to other cost/income indicators.

The BBC news indicated that the UK government considered that energy costs had risen quite remarkably these past few years and were outlining their plans to help people reduce their energy consumption and to reduce unit supply costs. The energy suppliers also stated that energy costs had risen and indicated this was due to increased global demand (and not profiteering on their part).

As usual in news broadcasts, there was no attempt to present details such as production costs, royalties, storage and delivery costs, marketing, metering, billing, renewal investment, profit, taxation etc.

So I just made the bland assumption that the BBC, UK government and spokesman for the "Big 6" UK energy suppliers were right..........................obviously they were not !!

Please accept my apologies.

Cheers

Don

UK energy costs are indeed rising in real terms. This doesn't mean they are high. Let me try to explain....

I don't have any detailed insight, but oil is getting technically more difficult to extract as shallow reserves deplete. This would cost a LOT more, but for increasingly effective technologies for drilling and reservoir pressurization techniques. Refineries and distribution continue to get more efficient. The cost might be going up due to demand fundamentals pushing the production towards more expensive reservoirs, but profiteering is really only a small part of the equation. In North America, gas prices are at very low levels compared to historic levels. Coal from the Powder River Basin continues to be produced in vast volumes at very low production costs. Yes, petroleum crude prices are a higher than long-term historic levels (but well down from recent peaks).

High energy costs are really the only effective mechanism for controlling demand until really effective renewables are available at the scale required. In my view, energy prices are nowhere near high enough for the long-term benefit of the human race and planet generally. The developed world's economic growth needs to be constrained (reversed?). High energy prices are part of the solution.

The UK is suffering from political paralysis with respect to energy policy. No new coal, no new nukes - shut-em all down, actually. Little domestic oil. Increasing dependence on North Sea gas that whilst at knock-down prices today, will only get more expensive. Just what are you guys going to do? A tidal generator in the Severn and a few wind farms won't cut it, I'm afraid.

You can't do both. Reduced costs will increase consumption. They should be planning to further increase unit costs to really drive the reduction in consumption. This is where populist governments all over the world are getting it tragically wrong.

Winky,

A good part of your last post doesn't seem to be visible. This only came to light when I tried to reply with a quote.

I now appreciate you wish to differentiate between "expensive" and "high cost" . IMHO this would be lost on the average consumer, whether in the UK, EU, Canada, the USA, Japan or, quite frankly, most other places.

The picture being painted last night was that the main energy suppliers in the UK were adding to the cost by taking large profits.

As for the UK, yes, the government doesn't seem to have any crdible long-term plan. The only solution at present IMHO, is to build more Nuclear power stations, search for more oil and gas in the north sea or around the Falkland Islands, establish good realtionships with those sitting on oil/coal/gas resreves, and build a bigger more effective military force so that when the chips are down.............. 

Cheers

Don

Educate yourselves on Peak Oil and you will have all the answers you need...

BBM

Part of the problem for the consumer is that energy feels like a right; rather like running water we expect the power to flow somewhat magically whenever we hit a switch. I don't think we see it as a resource to be respected and conserved, and we almost resent any costs for it. Much like with food production I sense a dislocation between the mechanism of production and the way it 'appears' in our lives. We don't see vast coal mining communities any more, power stations are vaguely mysterious and employ few people, North Sea oil happens 'out there' somehow.

It suits the governement to collude with the impression of massive profit taking by the energy companies in lieu of a coherent policy on energy. I have no doubt the energy companies are earning a decent coin but that is far from the whole story. To a degree I think higher prices will drive down wastage etc; I also think a few powercuts would have the same effect!

Bruce

Ah. A man after Ex Highlander. But this is the Naim Forum and we don't always trust the oil companies, or the coal/gas or power distribution industries.

What we are looking for is inspiration!!  new ideas !!

cheers

Don

Ah! Another new "feature"?

With regard to new ideas and/or inspiration, my advice is to use less and learn not to bitch about it. The era of cheap oil is over. That can also be said about energy in general. We live on a finite planet, so this day had to come sooner or later. Truth be told, you haven't seen anything yet. In a few short years, you will look back on today's energy prices and consider them a great bargain.

Jevon's Paradox will take care of conservation measures.

BBM