[loz]

Household energy bills could increase by as much as 40% this winter, the BBC has learned, as oil and wholesale gas prices hit record highs.

http://news.bbc.co.uk/1/hi/business/7461635.stm

We keep hearing that it is a global energy crisis and there is nothing we can do about it.

But why exactly is that?
According to http://www.ukooa.co.uk/issues/gas/
The UK a net exporter of Oil and Gas.
North Sea gas provides 40% of our energy needs.
Of western countries, only the UK and Canada are self-sufficient in their natural gas requirements.

So, if we have so much of the stuff, why does the world price affect us so much?

This perhaps is the rather staggering answer
http://www.catalyst-commercial.co.uk...market-prices/

You can blame the European power giants for sky-high bills: They buy the gas we can’t store and sell it Back to us!

Energy prices are rising faster in Britain than almost anywhere in Western Europe because foreign suppliers are rationing our own gas. As major users told MPs that European power monopolies were effectively holding Britain to ransom, the extent of the UK’s suffering was spelled out by the respected Organisation for Economic Co-operation and Development. It said UK energy prices have jumped 13.6 per cent in the past year, adding hundreds of pounds to domestic bills. This compares with 9.5 per cent in Germany, 12 per cent in France and just 2.8 per cent in the Netherlands. Energy prices are rising faster in Britain than almost anywhere in Western Europe because foreign suppliers are rationing our own gas. And there are warnings that UK household bills could rise by a further 25 per cent this autumn. The problem stems from the fact the country is no longer self-sufficient in gas from the North Sea and has become reliant on imports during the winter.

Foreign power firms are buying cheap North Sea gas from Britain in the summer and putting it into vast storage facilities on the Continent.They then refuse to pipe it back to the UK when it is needed in the winter, effectively rationing supplies and pushing up prices.The UK is vulnerable to these strong-arm tactics because we have such tiny gas holding facilities that we cannot store cheap North Sea gas in the summer for use in the winter. There is enough storage to supply the country with gas for only 13 days, compared with 99 days in Germany and 122 in France.

That says we are no longer self sufficient (contradining the earlier, older reference), but it seems that is because we cannot store it in the summer, then have to buy it back in the winter. If we stored it, we would have it for the winter...

[gazbarber]

The reason the price is going up arround the world is to do with investors buying futures in oil/gas/food ect now that a global house price crash/unsutable loans has caused a lot of pain. Banks/insitutions and investors are trying to claw back trillions of $ in right downs, but in the process creating huge bubbles in every market they touch, which causes more people/organisations to join "as the prices can only go up".

Many people are loaning money to buy futures, which is alright till the bubble colapses and have to pay the difference, especialy as the vast majority of the money they have 'bet' is not their own (interestingly this was one of the major reasons for the wall street crash/great drepression).

But in these global markets the people suffering is well everyone arround the world, if you think we've got it bad, imagine living in a country where you were bearly making subsistance before raw food prices practicaly doubled in a year.

[evilgenius]

I feel sorry for pensioners this winter and next. This country needs a complete overhaul or a civil riot like the days of Poll Tax for the government to really do something.

Personally if this keeps going Ill sell my house and move abroad with my wife, weve already talked about it. I got a letter today to say my electricity bill is rising 12% ( £52/year). Im in N.Ireland, we already pay the highest in the UK apparently.

This just isnt sustainable and we dont even have the water charges in yet, so I really feel for you guys over there. But stiff upp lip and all that eh? The british just keep taking it in the rear :/

[gazbarber]

The thing is its not a UK problem its world wide, unless you live somewhere that has bountiful crops and over flowing oil reserves your gonna be in the same situation where ever you are.

The only thing the government can do is reduce taxes and slash spending, it'll have an effect in the short run ... But i think these are mainly bubbles, although then they finaly peak is anyones guess. Although if the utilities companys ect, pass on the savings is anyone guess too.

[gavan]

The primary reason for the current massive rise in prices is the fact that there has been quite massive inflation of both the dollar and the pound since around 2001.

When you have monetary inflation, you always see what are called 'asset bubbles'. This means that for certain things, the cost simply rockets.

When there's a decent sized demand for something and lots of 'extra' money in the system (inflation) then there's a risk of an asset bubble forming. This is because there's lots of money seeking something that's in demand. People can and will bid higher to get it. Once the financial markets see the prices rising, the money men pile in to join the party.

Low interest rates exacerbate this effect - why put your money in the bank when you can make so much more in assets? And since there's inflation a low interest rate is a positive disincentive to save and an incentive to 'invest' in buying tangible stuff.

After the dotcom bubble burst in 2001, the Western governments and central banks decided to follow a strategy of inflating new asset bubbles to stimulate economic development. This was achieved by ridiculously low interest rates and lax monetary policy.

Up until about last September, credit/property were the chosen asset bubbles of the markets. Or more accurately, a feedback loop of credit<>property bubbles which fed off each other.

Now those bubbles have burst. All the money sloshing around in the market needs to find a new bubble.

Energy and food are currently experiencing some demand. Hence the cash is going there with people speculating in the hope of making fortunes. It's not helped by the fact that the market is being flooded with extra 'liquidity measures' by the central banks, in order to prop up the banking system which faces massive losses as a result of the credit/property bust.


Hence we are seeing disproportionate rises in the price of fuel and food as a result of bad policy over the last six or seven years plus a deliberate policy to bail out the banks through more inflation.

[OldAndSenile]

The ridiculous thing is that because of what Gavan is describing, and the media stories outlined in the original post, these things become a self-fulfilling prophecy. If we're told energy will rise 40%, people are going to want to invest in those markets now, and will be willing to pay a higher premium, knowing that a bigger rise is just around the corner.

If these were shares we were talking about instead of the thing people actually NEED, people would be crying foul about ramping and all sorts already, but for some reason, they're not...

[Chrisoldinho]

This is the first uncertainty I have ever really known since becoming an Adult and owning my own home. I turned 18 in 2002 and everything at the time seemed great, 6 years on and things are turning sour but my Dad keeps on telling me that these economic uncertainties (not sure if he was referring to the UK or Worldwide) has happened several times before whilst he was growing up. Is this true and where is the light at the end of the tunnel?

[gazbarber]

In the 70's I beleive oil rose to more than now even, imagine how bad that would ahve been in 70's money. Theres always a boom and bust cycle its the way our economics work, as long as we don't have another great depression that leads into some sort of world war it'll all blow over in a few years.

People will loose their jobs, but they'll get new ones, relationships will break up under the stress of it all and there will be fall out.

But how is this different from any bust cycle we've seen before? the only realy difference is that the houseing bubble grew far larger than it has before delaying the enevitable, many 'experts' were getting out in 2004/5 selling up an renting as prices had already risen above the precident for salery to mortgage ratio, but they keep going up for another 3 years all because of cheap credit and a need to get on the ladder.

Banks were sucked into this to, believeing that the pacakged up 'investment grade bonds' of dodgy loans/mortgages they were selling with one hand and buying them in with another, was a smart thing and 'this time its different'. They've lost a load of money and because of that we have the current situation, were banks are trying to claw back money and investors and institutions like hedge funds/pension managers are looking for an investment opportunity which doesn't involve residential or commercial property.

Shares are looking dodgy so the only bet in town is commodeties, now gold has gone through the roof it doesn't look that safe a bet and people want to spead their bet, problem is commodities like fuel and food have a much more direct effect on us than those like gold (but mean that people have to buy them rather than gold which they can ignore).

[pixelpixel]

It like that tv ad for a bank: "Its to pay for the bubbly at the Christmas party"

[overkill]

Some good points, but as ever, what is the answer? Govt has no control over these events, and it's been left up to shareholders to speculate (at our expense) and companies to 'keep them happy' by racking up dividends - at our expense.

Answer:- nationalise the utilities and cut back the number of gas fired power stations.

Problem:- who's going to pay for it, and would anybody, and going on the NR crisis they won't, stand for it?

Second problem:- govt was warned that privitization of the utilities would have dire long term consequences, and that switching to gas would create huge future pressure on bills. It's happened, and the answer is in the above. But again, no one will accept the solution.

The food crisis. Now what is driving that? There are no food shortages (beyond the traditional ones) the excuse are thinner than paper, so why are they rising so quickly? The answer, as again people have pointed out, is that the big 'middle men' and the supermarket chains are profiteering.

So, what is the point of 'leaving the country' to escape it? It's happening everywhere. The cost of living in Europe is mind numbing, and while we complain, I couldn't face the costs of somewhere like Norway, Denmark or the low countries. Never mind Eire where tax is murder as well.

We are well and truly boned...............

[gazbarber]

Getting rid of the stock markets might do the world of good, does't really seem to serve a great purpose especialy as things like the commodities market could be replaced/done by just going direct to the supplier like you do for anything else in this world.

[loz]

Originally Posted by overkill

Answer:- nationalise the utilities and cut back the number of gas fired power stations.

Problem:- who's going to pay for it, and would anybody, and going on the NR crisis they won't, stand for it?

I note GB said "massive investment in Nuclear Power as a solution" this week.
It doesn't seem to have made the headlines it once would have.
One winter of 40% price rises and most people will be willing to ignore any potential long term problems with nuclear.

Originally Posted by gazbarber

Getting rid of the stock markets might do the world of good, does't really seem to serve a great purpose especialy as things like the commodities market could be replaced/done by just going direct to the supplier like you do for anything else in this world.

Funny, as I scanned through the channels last night I caught a few moments of "Trading Places".
As the Dukes explain how the stockmarket works, Eddie Murphy says something like "so you guys are just bookies?", to which the Dukes reply "you get it son"

[Mac Man]

Originally Posted by loz

Funny, as I scanned through the channels last night I caught a few moments of "Trading Places".
As the Dukes explain how the stockmarket works, Eddie Murphy says something like "so you guys are just bookies?", to which the Dukes reply "you get it son"

Seems more like a giant pyramid scam these days - the whole financial/commodities trading issue.

Loads of money piles into a commodity. Prices shoot skyward. The 'clever' ones bail out just before the peak. The price crashes. The poor shmucks who got in at the tail-end get burned while the 'clever' ones find somewhere else to put their billions.

And so the merry-go-round starts again with something else.

Tulips anyone?

[Ed Selley]

Originally Posted by Mac Man

Tulips anyone?

Nah, I've just been given an excellent tip off on a start up company trading in the South Seas thanks.

[gazbarber]

House anyone? new build flat in the centre of the city of your choice, even do shared equity ...

[Decadence]

It's all part of the big plan to get the Euro and Sterling to an exchange rate that no longer makes it beneficial to have the Pound...suddenly the only answer to all the problems will be to adopt the Euro.

[gazbarber]

Originally Posted by Decadence

It's all part of the big plan to get the Euro and Sterling to an exchange rate that no longer makes it beneficial to have the Pound...suddenly the only answer to all the problems will be to adopt the Euro.

Those damn lizard men are always trying to conspire againt the British people

[gavan]

Originally Posted by Chrisoldinho

This is the first uncertainty I have ever really known since becoming an Adult and owning my own home. I turned 18 in 2002 and everything at the time seemed great, 6 years on and things are turning sour but my Dad keeps on telling me that these economic uncertainties (not sure if he was referring to the UK or Worldwide) has happened several times before whilst he was growing up. Is this true and where is the light at the end of the tunnel?

Yes, these things go in cycles. Roughly every 20 years or so.

You are now experiencing what a lot of us saw at the end of the 80s. Welcome to cold, harsh reality

The bad times haven't even started yet, this is just the prelude. People are feeling the pinch but things are still coasting along from the inertia of the boom years.

Pretty soon we'll be seeing strongly rising unemployment and most probably a huge home repossessions crisis like the US has been getting for over a year now. House prices are going to plummet like a stone and unless we see large wage rises even those in work are going to find themselves squeezed hard as energy and food costs go up.

Plus, don't expect to be able to use credit to tide you over. We'll see credit conditions noticeably tightened. Remember how mortgages just seemed to dry up a few months ago? Expect something similar to happen with credit cards and personal loans.

We're looking at things getting a lot worse into 2009 and probably even 2010 and then stagnating for a couple of years, in my opinion.


To quote Battlestar Galactica: "All this has happened before and it will happen again...."

[Ed Selley]

Originally Posted by gavan

Plus, don't expect to be able to use credit to tide you over. We'll see credit conditions noticeably tightened. Remember how mortgages just seemed to dry up a few months ago? Expect something similar to happen with credit cards and personal loans.

This is the bit that interests me at the moment. In the last month my credit limit was upped without me asking and I received 6 loan offers through the post. When these stop, I'll know that we've started to hit the fan.

[Mac Man]

Originally Posted by gavan

Yes, these things go in cycles. Roughly every 20 years or so.

You are now experiencing what a lot of us saw at the end of the 80s. Welcome to cold, harsh reality

I remember it well. The 'Winter of Discontent' before the Conservatives stormed in to power in 1979. Power cuts, rampant inflation in double figures, unemployment in the millions, cuts in services, the unions holding the country to ransom.

A lot of people see many parallels back to those dark days of the late 70s and early 80s.

Things will get worse but I don't see things getting as bad as they did then. Unless, of course, the whole world economy goes tits up.

As then there will be winners and losers. For every house repossion there will be a young couple able to buy their first house due to the fall in house prices.

[loz]

Originally Posted by gavan

The bad times haven't even started yet, this is just the prelude. People are feeling the pinch but things are still coasting along from the inertia of the boom years.

Pretty soon we'll be seeing strongly rising unemployment and most probably a huge home repossessions crisis like the US has been getting for over a year now. House prices are going to plummet like a stone and unless we see large wage rises even those in work are going to find themselves squeezed hard as energy and food costs go up.

We're looking at things getting a lot worse into 2009 and probably even 2010 and then stagnating for a couple of years, in my opinion.

But how can that be? Gordon Brown and NL are in charge. Surely the mastermind of the most glorious financial period in UK history has already accounted for this and would never let it happen. I mean, they are still predicting growth

[gavan]

Originally Posted by Ed Selley

This is the bit that interests me at the moment. In the last month my credit limit was upped without me asking and I received 6 loan offers through the post. When these stop, I'll know that we've started to hit the fan.

Companies are trawling for new business all the time but for some time now there's been a trend for fewer approvals:

http://www.thisismoney.co.uk/credit-...4&in_page_id=9


There was also the much publicised case of Egg credit cards being withdrawn

http://news.bbc.co.uk/1/hi/business/7222336.stm

It's only a matter of time before we see widespread cases of reduced credit limits on all but the most credit-worthy......

[gazbarber]

I got a loan offer through form barclays the other day, may get these every now and again, you could borrow this much at such percentage, quite passive. But this one was much more agressive, "we've put asside 28k for you, you could spend it on ...." then at the side had a brakedown of costs, but it was for a different amount and maybe even different interest rate. It went in the bin with the venture card or something which are keep trying to 'temp' me with a 43% interet credit card, no idea what they playing at though as i have an excellent credit history.

[gavan]

Originally Posted by gazbarber

I got a loan offer through form barclays the other day, may get these every now and again, you could borrow this much at such percentage, quite passive. But this one was much more agressive, "we've put asside 28k for you, you could spend it on ...." then at the side had a brakedown of costs, but it was for a different amount and maybe even different interest rate. It went in the bin with the venture card or something which are keep trying to 'temp' me with a 43% interet credit card, no idea what they playing at though as i have an excellent credit history.

That's the point. If you have an excellent credit history they want you to take on more and more debt because you've proved you can handle it and make at least minimum payments.

Lenders make their money by pocketing the difference in interest that you pay vs the interest that they pay to obtain their funds. They must lend to make money, the trick is to lend it to the right people who will pay it back.

Their dream scenario is to get someone on the credit hook with a whopping debt who makes minimal payments, but makes them reliably. The longer you stay in debt, the more cash you make them. You are just an income stream to them.

[Ambient Fish]

As I understand the situation with UK energy prices the problem lies with the fact that the price for bulk natural gas is tied to the price of oil, can anyone explain to me why this is the case. Why is the price of one commodity tied to another in such a way that the only loser is the end user? whilst every other participant in the supply chain makes more profit/tax revenue.

[evilgenius]

specuators I think.

[Decadence]

Don't worry! We're saved! They've just realised that there's more oil under Iraq than there is in Saudi Arabia...I'm so glad we were one of the main team players who "liberated" the black gold, maybe we'll get a good deal on the barrel prices!

If we invade Saudi Arabia next we could do rather nicely! Why does so much of our oil have to be underneath other people's land, it's such a shame!

[Mac Man]

keep an eye on oil prices here...


http://www.bloomberg.com/markets/com...rgyprices.html

or here

http://www.oil-price.net/

News on oil prices here

http://www.msnbc.msn.com/id/12400801/

http://afp.google.com/article/ALeqM5...NnKvtkfytSxPWQ

[funkyspider]

Originally Posted by Mac Man

As then there will be winners and losers. For every house repossion there will be a young couple able to buy their first house due to the fall in house prices.

I managed to buy my house 12 years ago following its reposession. It had been empty for a few years after being reposessed. The building society had it on the market at a price to attempt to recover the debt owed on it (65,000+). Interest rates were high and over the years of being empty it was damp and looking a bit sorry for itself. A water leak in the kitchen had turned the floorboards into sponge and eventually they decided to cut their losses and put in a sealed bid day. I had a punt for 35,799 and won.

So as the Mac said, one mans loss is another mans gain.

[Jakeh1969]

Originally Posted by Ambient Fish

As I understand the situation with UK energy prices the problem lies with the fact that the price for bulk natural gas is tied to the price of oil, can anyone explain to me why this is the case. Why is the price of one commodity tied to another in such a way that the only loser is the end user? whilst every other participant in the supply chain makes more profit/tax revenue.

There was an article recently in the Mail on Sunday saying that one of the utility regulators was accusing the utility companies of price fixing by linking unrelated resources with the oil price.

It'll be interesting to see if anything happens......