The first is that this move shows how rigged the supposed UK energy market is. If this supposed market can only work on the basis of regulation and government support it is not a market at all. Why we have to suffer the cost of this sham is hard to work out when at the end of the day there is, in effect, a single national gas supply and the so-called market never actually changes what come out of the pipe we are connected to. The sooner utilities were nationalised to recognise this reality the better.
What comes out of the pipe might come from the N Sea, from a couple of small onshore UK fields, arrive in LNG tankers from abroad, through pipelines from Russia, or parts of Europe. Just because it’s all CH4 (roughly enough) the idea that the market doesn’t change what comes out is asinine to a remarkable degree.
Also, obviously, it’s not the pipelines about to go bust.
But love that nationalisation idea.
Currently we’ve got a substantial part of the domestic user base covered by a price cap. This means that retail prices do not, are not allowed to, vary when wholesale prices do. This is what is driving those intermediaries, the retailers, into bankruptcy. OK, not nationalise everything. Wholesale prices are still what wholesale prices are. Because our sources of gas are still that world market – LNG, pipelines and so on – because we’re not about to do the sensible thing and go fracking.
So, what can happen now? Either that retail price cap has to go – which solves the current problem – or all of that gap between high wholesale and low retail prices has to be covered by the taxpayer. Which is what is being complained about, that the taxpayer is going to have to cover the gap between high wholesale and the capped retail prices.
Nationalisation doesn’t even solve the problem being complained about. Which is asinine, rampant, stupidity.
Second, even though some consumer facing energy companies will be facing bankruptcy in the situation that has developed this does not mean that there isn’t profiteering going on. There clearly is. The cost of producing gas has not risen. All that is happening is that increased demand as the economy reopens is being reflected in increased prices and gas producers are profiteering from it. Of course, in the largest cases these producers also have consumer facing supply companies as well. The exploitation will be very obvious in their accounts, but the abuse is permitted by UK regulators. The question as to why that is has to be asked.
So, we must deny the price system then. Oh, and also extend UK price controls to LNG cargos on the High Seas, to pipelines out of Russia and…..have I said asinine stupidity already?
Fourth, in that case the need for a windfall tax is significant. And it could be done. All the major gas producers will be producing country-by-country reports for tax purposes. These could readily be adapted to indicate appropriate profit allocations to jurisdictions that could then be subject to excess profit taxes. International agreement is not required in that case. Political courage would be though.
British Gas already pays 75% of profits in tax – profits from gas production that is. The Crown owns all gas domestically produced. Our biggest import sources is Norway and we’re to go tax their state owned oil and gas company through country by country reporting, are we?
Eighth, this feels like another part in the systemic failure I mentioned a few days ago: we have constructed a wholly artificial market in energy that cannot manage the world we now live in, and the consequences are real as the failure imposes cost. How many times must we now suffer this?
What the hell’s artificial about a market where when demand rises in the face of short term static supply the price rises?