Fuel Poverty

Erm, no, not sure I like this at all:

They predicted the number of households suffering fuel poverty would rise by around 50% to more than 6m following warnings that gas bills alone could soar by the same figure beyond £1,000 a year within a few years.

The National Consumer Council (NCC) said suppliers should offer more low-cost "social tariffs", with discounts and rebates, to families on low incomes, older people and those with long-term illness,

I\’m not all that enamoured of the idea that people won\’t be able to heat their homes (despite the point that this is exactly what we need to reduce emissions) but more importantly I\’m really not in favour of the companies being the people who have to compensate for it.

If we as a society decide (and I make no comment about whether we should or shouldn\’t) that the poor deserve to get their heating bills subsidised then we as that society making the decision should pay for it. That means charging tax and then using that tax to reduce prices (or to give money to pay the bills) rather than clubbing the companies into doing so. The latter method introduces distortions into the market…..and it also means that the investors in the companies are the people carrying the burden of the subsidy.

That is, all those pension funds with British Gas shares are paying the subsidy, rather than all taxpayers who are the people calling for the subsidy (to the extent that they are of course).

This just isn\’t the way, morally, that it ought to be done. If we call for money to be spent on others then it is us who should stump up the money to pay for it. Spending other peoples\’ money on our pet projects is closer to theft than welfare.

This is even worse:

while Energywatch called for EU-wide action to break a historic link between oil and gas prices

I\’m willing to believe that the are technicalities in the market which I don\’t know (for example, gas prices are going to be influenced a great deal more by pipelines, capacity, LNG facilities and so on than oil prices are, storage is easier with oil etc) about, but breaking the link?

How can you? They\’re substitutes for the Lord\’s sake. If heating oil prices go up then more will switch to gas for heating, meaning the price of gas will go up etc.

3 thoughts on “Fuel Poverty”

  1. Surely it’s more complicated than that? Nuclear power is a substitute of oil-fired power, but that doesn’t mean the price of uranium follows the price of crude (and over the last year it certainly hasn’t). Oil and gas are substitutes to some extent but declining ones in many European countries and at one level hardly substitutes at all – I can’t oil-heat my house, or natural gas-drive my car.

    Tim adds: Certainly it is more complicated than that. We don’t really use oil to generate electrocity (less than 1% of supply last time I looked) and we can’t use nuclear to power cars…..at least, not until batteries get better. But oil and gas are closer substitutes than that. Yes, people really do heat their houses with oil for example (the price of “fuel oil” is a closely watched one in the US as so many in the NE do use that).

  2. General belief in the oil sector.
    – Oil trading is like a series of one night stands.
    – Gas trading is like marriage.

    A spot market in gas exists, but all of the infrastructure is built with long term contracts. These contracts are normally priced with reference to oil prices, as there are no gas price indexs with the level of recognition that Brent or WTI have.

    If you were signing a contract with Gazprom, would you prefer to base the price on some variant Brent, or on a spot market gas price that depends on the regular flow of gas from Russia?

    Maybe in the future when gas usage stabilises, we can see the gradual decoupling of the prices.

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