Calling detail focused folks

Several companies have faced criticism for not buying energy in advance, putting their business at risk through exposure to volatile costs on the spot market.

Well, yes, OK. Shoulda hedged, we get it.

Now, the task is. There will be those who insist upon this point and they’ll be right too. Or at least that you can’t complain if you go bust having not hedged.

Great, But what we’re looking for is a commentator, or NGO, or general idiot, who makes this argument and who has also been vocally in favour of the Robin Hood Tax, or FTT. Because of course the aim of the FTT is to kill that idle speculation which allows folks to hedge. So, we’re on the look out for someone shameless enough – or stupid enough – to try to make both arguments.

The P³ is edging toward it but that’s too easy. We need someone it’s worth making fun of for doing it.

8 thoughts on “Calling detail focused folks”

  1. In a market where there are price controls, there can be no effective hedging. The choice of the hedging term here is by itself a form of wild speculation, as in normal hedging there would be a known period at which the price could be reset and a new hedge placed to manage future exposure (contract start until the end of the fixed term).

    But we already know this as we are seeing the results at the moment… only those providers with very deep pockets, or those who happily hedged at the right time/for the right period are surviving. This is not based on sound hedging strategy, but on good speculation, extensive capital resources, or other revenue streams.

  2. Yes, there’s no hedging strategy that can operate successfully in a price-capped market unless the cap is set at a level that renders it unneccessary.

  3. “Not buying energy in advance”

    But none of these companies actually “bought energy in advance” The country as a whole has very limited gas, and vanishingly little electricity storage. Clearly no start-up had the finances to buy their own…

  4. It’s a mystery how these green energy companies could have gone bust. The feed in tariff for solar and wind was fixed, so all the retailer had to do was maintain a slim margin. It makes one wonder what can have gone wrong.

  5. Isn’t there a point at which one runs out of hedge ?
    Buying futures in the hope of the price rising is fine, but when the 3 months or whatever end and the time comes to buy again, haven’t all those savings evaporated into higher prices ?

  6. @Dave Ward – “The country as a whole has very limited gas, and vanishingly little electricity storage.”

    Storage is not needed to buy something in advance. The buying occurs when the contract says it does, which can be separate to delivery. You can see this in action for yourself when you buy fast food where you have bought it before it is even made.

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