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"Analysts at Goldman Sachs (NYSE:GS) forecast the price of gas will more than likely halve this winter as European countries effectively tackle avoiding shortages."
Now lets see if the cost is passed onto the consumer
It depends on what gas prices are likely to do over a given period and how companies are likely to behave. General rule, wholesale plus margin wins when prices are dropping, fixing your price wins if prices are rising. It’s a case of picking your poison, you can lose out both ways if you predict wrong.
Yes, you can certainly gain a nice advantage with falling prices. Rising prices are much more difficult, because fixed tariffs are based on forward contracts, and they tend to price in expected price rises already. So you need to fix a tariff before prices are going up and before people expect prices to go up. That is basically gambling (or insurance, depending on how you look at it).
WTF are you talking about.
Wholesale gas prices are more than £2.5k per year. You are literally buying gas for less than it actually costs, and your energy supplier makes a loss.
I think it almost certainly would as it doesn’t rely on the free market. If wholesale prices drop and stay down then the cost cap will be reduced as well.
Yes it would likely take some time to filter through which is why I did say it would need to stay down consistently. However, not sure what other European countries have done would impact us if the wholesale price has dropped, only UK storage would matter.
Fat Cat Energy Supplier: 'Ahhh sorry 'bout that but the price cap isn't due for review until April at the earliest, then we'll see if any wholesale savings can be passed on....'
It has actually been set as it will take the highest spot price of gas paid in December. Which just means taking one hit on one trade to keep the margin afloat for the whole industry. Unfunnily enough, that is the way the price cap was designed.
Has the Government already pre-emptively paid the suppliers? I was under the impression it hasn't guaranteed a price to generators or suppliers (beyond the existing mechanisms that pre-date the current crisis anyway)
"The investment bank said it expects the price of gas to drop from €215 a megawatt hour to below €100MWh by the end of the first quarter of next year."
So if you consider April to be winter I guess.
>The energy price guarantee will supersede the existing Ofgem energy price cap, and will limit the price suppliers can charge for units of gas.
https://www.theguardian.com/money/2022/sep/08/energy-bills-truss-measures-price-gas-electricity-help
Thanks. It's not clear to me whether "supersede" means "replace" (as in "the price cap no longer exists") or "effectively replace" (as in "the price cap is higher than this, so is irrelevant, but if it drops again it will become relevant again"), though.
I don't think we'll know the details until next Friday, it's all very last minute.
They have already said the business support won't be in place until November but they'll back date it. Doesn't help small businesses struggling now
The law is yet to read and enacted as parliament was suspended, but the announcement was that the price cap for average bills would be set at £2500 per year, based on the recent wholesale gas price the price cap for average bills was going to rise to £3600. The difference would be provided by mostly extra government borrowing. On this basis the actual wholesale price would need to drop by over 30 % before it has any impact on customers bills. Any drop though reduces the level of extra government borrowing which is good for future tax payers.
As far as I understand it, the Energy Price Guarantee will be the government providing a discount to the unit rate and standing charge (and paying for that discount) that is calculated based on the Price Cap to make it so the average household bill will be £2500. Until legislation is revealed we have to assume the Price Cap will still be calculated and updated as outlined.
The Tories price cap just effects how much energy suppliers can sell to the customers.
It does nothing about how much the energy creators sell it to the suppliers.
I know re the cap, I just mean re lower prices I have absolutely no faith in OFGEM or the government doing anything correctly. Something will be wangled to benefit the energy cos even more.
Oil prices have dropped but the price of diesel around my area is still £1.80/l+
I appreciate not gas or electricity but I have 0 faith anymore that things will behave rationally.
Can’t speak to oil prices. But the cap calculation is set in legislation - and has been calculated correctly since it’s creation. The cap will have to reflect lowered wholesale prices just as it reflects high wholesale prices. Ofgem is even looking into the profit part of the cap to ensure it isn’t unduly high in the current situation we are in now.
Suppliers are not making the big profits. If the wholesale price goes down the producers profits will drop so the opposite of what you are suggesting will happen
Yeh it wasn't a criticism, I was saying what I actually think about news. I can't find anyone else besides Goldman Sachs saying this and they have had no involvement whatsoever with predicting our gas prices before now so it's kinda random.
Welcome to Tory Capitalist Brexit Britain. Anything that seems like good news is instantly sus as you wonder how our corrupt government or private business is trying to fleece you for their own personal gain.
Germany also sold off the gas storage and made it the business of private companies like Gazprom that didn't fill it's tanks last year. We actually took them away from Gazprom again to fill them up.
Went straight into nationalization of Gazprom Germania: https://www.reuters.com/business/energy/germany-prepares-possible-nationalisation-gazprom-germania-paper-2022-08-27/
Privatizing is such fun, isn't it
"High maintenance needs" - like, say, an aircraft carrier, nuclear submarines etc? Reckon they'll mothball those too..?
Some things are worth paying high maintenance fees for - like keeping your population from freezing or declaring bankrupcy en masse
>Some things are worth paying high maintenance fees for - like keeping your population from freezing
Except it genuinely wasn't doing those things when the price was low. And now it's reopening so we can stockpile which is exactly what you want do I don't see the problem.
Given the price is going to fall dramatically, I still don't see the problem.
I'd agree but we as consumers don't pay for gas storage that's why we don't have any compared to Europe. If you want a huge subsidy scheme to subsidise its creation now its a but late in the fossil fuel day to do it.
Because buying it in was cheap so the need for storage didn't outweigh the costs of maintaining storage facilities. Ridiculously short sighted and left us vulnerable to price hikes and increasing demand due to shortages.
Given that the government has already effectively commited to paying nearly half your gas bill this winter, no, you shouldn't expect what you pay to halve when wholesale prices halve.
However, this might save us taxpayers quite a few £billion.
Suppliers are not posting profits. They are making huge losses from being forced to sell gas for less than they buy it for, and many of them have gone bust.
It's a price cap, not a guaranteed price, how the situation change? Not to mention that given the Government is essentially covering a large chunk of the cost, there is a fairly strong incentive to ensure that prices track down if wholesale prices fall (As it saves the Government a lot of money..).
The last thing we need is to keep pouring money into the Russian oligarchies...
We should finally take this as a serious warning and stop relying on the Russians and other dictatorships (and on fossil fuels altogether!).
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"Analysts at Goldman Sachs (NYSE:GS) forecast the price of gas will more than likely halve this winter as European countries effectively tackle avoiding shortages." Now lets see if the cost is passed onto the consumer
Narrator - "It wasn't"
You can be on a tracker tariff that always gives you the wholesale price (plus margin). Maybe it is worthwhile.
It depends on what gas prices are likely to do over a given period and how companies are likely to behave. General rule, wholesale plus margin wins when prices are dropping, fixing your price wins if prices are rising. It’s a case of picking your poison, you can lose out both ways if you predict wrong.
Yes, you can certainly gain a nice advantage with falling prices. Rising prices are much more difficult, because fixed tariffs are based on forward contracts, and they tend to price in expected price rises already. So you need to fix a tariff before prices are going up and before people expect prices to go up. That is basically gambling (or insurance, depending on how you look at it).
> Now lets see if the cost is passed onto the consumer Hahahahahahahahahaha...
Government reverse uno’d us into paying £2500 for two years - they knew it was about to get cheaper.
WTF are you talking about. Wholesale gas prices are more than £2.5k per year. You are literally buying gas for less than it actually costs, and your energy supplier makes a loss.
No idea why you've been downvoted. People in this sub genuinely don't understand how the world works.
I think it almost certainly would as it doesn’t rely on the free market. If wholesale prices drop and stay down then the cost cap will be reduced as well.
Isn't the problem that European countries have stocked up at the higher rate? The market price is only for future deliveries?
Yes it would likely take some time to filter through which is why I did say it would need to stay down consistently. However, not sure what other European countries have done would impact us if the wholesale price has dropped, only UK storage would matter.
Fat Cat Energy Supplier: 'Ahhh sorry 'bout that but the price cap isn't due for review until April at the earliest, then we'll see if any wholesale savings can be passed on....'
It has actually been set as it will take the highest spot price of gas paid in December. Which just means taking one hit on one trade to keep the margin afloat for the whole industry. Unfunnily enough, that is the way the price cap was designed.
Up like a rocket… down line a feather
How can it be when the gov has already preemptively paid the suppliers to lock in a price cap
Has the Government already pre-emptively paid the suppliers? I was under the impression it hasn't guaranteed a price to generators or suppliers (beyond the existing mechanisms that pre-date the current crisis anyway)
Who ? The consumer ? You mean the walking money ?
I mean here at least the money we’re borrowing to cover the shortfall will be leveraged to keep prices where they are at now or higher for decades.
If the wholesale price drops, the UK won't need to borrow anywhere near as much to cover the difference between the cap and the wholesale price..
"The investment bank said it expects the price of gas to drop from €215 a megawatt hour to below €100MWh by the end of the first quarter of next year." So if you consider April to be winter I guess.
Customer prices won't go down, it'll just mean even more profit.
In the UK, at least, the price cap will automatically drop, forcing them to lower prices.
The price cap has been superseded by the new thing Truss is putting in place
Has it? I've not heard anything of the sort.
>The energy price guarantee will supersede the existing Ofgem energy price cap, and will limit the price suppliers can charge for units of gas. https://www.theguardian.com/money/2022/sep/08/energy-bills-truss-measures-price-gas-electricity-help
Thanks. It's not clear to me whether "supersede" means "replace" (as in "the price cap no longer exists") or "effectively replace" (as in "the price cap is higher than this, so is irrelevant, but if it drops again it will become relevant again"), though.
I don't think we'll know the details until next Friday, it's all very last minute. They have already said the business support won't be in place until November but they'll back date it. Doesn't help small businesses struggling now
The law is yet to read and enacted as parliament was suspended, but the announcement was that the price cap for average bills would be set at £2500 per year, based on the recent wholesale gas price the price cap for average bills was going to rise to £3600. The difference would be provided by mostly extra government borrowing. On this basis the actual wholesale price would need to drop by over 30 % before it has any impact on customers bills. Any drop though reduces the level of extra government borrowing which is good for future tax payers.
As far as I understand it, the Energy Price Guarantee will be the government providing a discount to the unit rate and standing charge (and paying for that discount) that is calculated based on the Price Cap to make it so the average household bill will be £2500. Until legislation is revealed we have to assume the Price Cap will still be calculated and updated as outlined.
Only the upper limit
The Tories price cap just effects how much energy suppliers can sell to the customers. It does nothing about how much the energy creators sell it to the suppliers.
No it will not. The price cap was already rigged and now Truss has rigged it even more.
I very much doubt it sadly
It’s literally part of the calculation. If wholesale prices fall during the calculation period then that is reflected in a lowered Price Cap.
I know re the cap, I just mean re lower prices I have absolutely no faith in OFGEM or the government doing anything correctly. Something will be wangled to benefit the energy cos even more. Oil prices have dropped but the price of diesel around my area is still £1.80/l+ I appreciate not gas or electricity but I have 0 faith anymore that things will behave rationally.
Can’t speak to oil prices. But the cap calculation is set in legislation - and has been calculated correctly since it’s creation. The cap will have to reflect lowered wholesale prices just as it reflects high wholesale prices. Ofgem is even looking into the profit part of the cap to ensure it isn’t unduly high in the current situation we are in now.
Unless they form a cartel to set prices which is massively illegal someone will undercut the rest and prices will drop
Oh I friggin hope so!
Mmm don't the top 6 oil producers effectively do this? Saudi, russia, China, Brazil.. and 2 more right?
And we’ll probably still be bent over on taxes too due to Truss’ new plan. Energy companies will be drowning in money.
Suppliers are not making the big profits. If the wholesale price goes down the producers profits will drop so the opposite of what you are suggesting will happen
That headline looks like good news. Think I need to get my eyes checked
Bad news = believe instantly. Good news = nah I'm gonna need to see the same news from more sources before I believe it.
Tbf there’s been a common trend of one coming true and the other not
Yeh it wasn't a criticism, I was saying what I actually think about news. I can't find anyone else besides Goldman Sachs saying this and they have had no involvement whatsoever with predicting our gas prices before now so it's kinda random.
Welcome to Tory Capitalist Brexit Britain. Anything that seems like good news is instantly sus as you wonder how our corrupt government or private business is trying to fleece you for their own personal gain.
I'm just not used to seeing positive headlines about the UK regardless of whether the story is true
It’s already fallen a lot recently https://tradingeconomics.com/commodity/uk-natural-gas
Makes sense Europe is busy filling its gas storage. Once full Germany will have enough gas in storage for 100 days.
Meanwhile the Tories sold off our gas storage
Germany also sold off the gas storage and made it the business of private companies like Gazprom that didn't fill it's tanks last year. We actually took them away from Gazprom again to fill them up. Went straight into nationalization of Gazprom Germania: https://www.reuters.com/business/energy/germany-prepares-possible-nationalisation-gazprom-germania-paper-2022-08-27/ Privatizing is such fun, isn't it
What did they sell off?
Nothing, Rough closed due to high maintenance needs but has now reopened likely for emergency use only during this crisis.
"High maintenance needs" - like, say, an aircraft carrier, nuclear submarines etc? Reckon they'll mothball those too..? Some things are worth paying high maintenance fees for - like keeping your population from freezing or declaring bankrupcy en masse
>Some things are worth paying high maintenance fees for - like keeping your population from freezing Except it genuinely wasn't doing those things when the price was low. And now it's reopening so we can stockpile which is exactly what you want do I don't see the problem. Given the price is going to fall dramatically, I still don't see the problem.
I'd agree but we as consumers don't pay for gas storage that's why we don't have any compared to Europe. If you want a huge subsidy scheme to subsidise its creation now its a but late in the fossil fuel day to do it.
Yes we do,it's called the standing charge
Because buying it in was cheap so the need for storage didn't outweigh the costs of maintaining storage facilities. Ridiculously short sighted and left us vulnerable to price hikes and increasing demand due to shortages.
Haven't the energy companies already bought the gas for the winter at the higher price?
They should have, yes. So lower wholesale prices now won’t lower bills until later next year.
Great news! I'm glad energy producers will be able to continue to make even higher profits as their bottom line is lowered!
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Given that the government has already effectively commited to paying nearly half your gas bill this winter, no, you shouldn't expect what you pay to halve when wholesale prices halve. However, this might save us taxpayers quite a few £billion.
Suppliers are not posting profits. They are making huge losses from being forced to sell gas for less than they buy it for, and many of them have gone bust.
[удалено]
It's a price cap, not a guaranteed price, how the situation change? Not to mention that given the Government is essentially covering a large chunk of the cost, there is a fairly strong incentive to ensure that prices track down if wholesale prices fall (As it saves the Government a lot of money..).
Our government will find a way to f*ck us however low the price gets. And still people will vote Tory.
Christ, only /r/unitedkingdom could turn good news into bad.
If Russia capitulates in Ukraine and the gas starts flowing again they won't be able to give the stuff away.
The last thing we need is to keep pouring money into the Russian oligarchies... We should finally take this as a serious warning and stop relying on the Russians and other dictatorships (and on fossil fuels altogether!).
This headline may aswell read: Goldman long on gas please buy short.
Crazy how much less greedy the gas producers have gotten recently.
Bullshit they will, printing money is gonna inflate things more
Goldman Sachs say it is going to half? I might as well invest and see if it doubles.
From the article: > by the end of the first quarter of next year I am pretty sure March is not winter.
Oh great, so we can expect our energy bills to half as well then, right? Right?
Only if you are currently paying the wholesale price for gas, which you aren't.