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Energy Prices Falling Rapidly

March 7, 2019

By Paul Homewood

 image

http://www.catalyst-commercial.co.uk/reports/227/energy-market-report—mar19/

 

The renewable lobby often claims that the rising cost of fossil fuels will help make renewable energy competitive.

However, oil and gas prices remain stubbornly uncooperative. Gas prices in particular are back down to levels seen last spring, after peaking last autumn.

As is usually the way, power prices have followed the same pattern.

Oil and gas are very much cyclical markets. When supply is tight, prices rise, thus attracting more investment to increase production.

Prices therefore fall, cutting profitability and new investment, and setting the whole cycle back in motion again.

 

How long supply can keep meeting ever rising demand is a moot point. But there is little sign of anything changing in the foreseeable future.

27 Comments
  1. March 7, 2019 12:30 pm

    That pesky “supply and demand” situation again. Dang.

  2. matelot 69 permalink
    March 7, 2019 1:00 pm

    Oh goody, that means all the domestic tariffs will go down again! …..Oh, wait………..

  3. BLACK PEARL permalink
    March 7, 2019 1:01 pm

    With the planet sitting on top of most probably vast amounts of untapped shale, with the ever improving methods of efficiency in extraction, there maybe a glut of cheap gas & oil in the near future as countries gear up to its potential for themselves !

  4. Joe Public permalink
    March 7, 2019 1:23 pm

    • It doesn't add up... permalink
      March 8, 2019 1:49 pm

      A comparison of UK gas imports between 2011 and 2018 by origin:

      GWh…………………….2011…………….2018
      LNG
      Algeria………….,,,,….2,686……….4,060
      Norway………………10,114………..1,938
      Qatar……………….234,077……….49,212
      Trinidad ……………5,903…………10,392
      Egypt……………….890………………2,016
      Eq Guinea……………..0……………….753
      Nigeria……………..13,026……………….0
      Peru……………………….0…………..1,472
      Russia…………………….0…………20,336
      USA…………………1,576……………5,658
      Yemen……………….6,521……………….0
      Total LNG……………274,795…….95,838
      Pipeline
      Zeebrugge BE……………..4,032……..35,527
      Balgzand NL……………..69,001……..30,096
      Langeled………………..165,570…….205,861
      Via FLAGS……………37,277…………74,448
      Frigg/Vesterled ……..31,347………..60,017
      SAGE pipeline………..9,489…………21,598
      CATS pipeline……….5,960…………….168
      Total Pipeline……….322,675……..427,715

      Total Import…………597,470………523,552

      Chart of the history:

      • Joe Public permalink
        March 8, 2019 7:47 pm

        Very interesting. Thanks IDAU

  5. Gerry, England permalink
    March 7, 2019 1:56 pm

    And just as the Tories’ socialist energy price gap has lead to all the Big Six putting their tariffs up. Why would they miss the chance to do so?

    • Ian permalink
      March 7, 2019 2:12 pm

      Yes, I wish somebody wpuld tell the Big Six that prices are coming down. I’ve got to renew my energy contract shortly and their offers are all higher than the current tariffs. I may have to take a risk with one of the new entrants to the market.

    • March 7, 2019 9:01 pm

      Our gas prices are going up 7%. The standing charge – which didn’t even exist a few months ago (until Ofgem’s moronic price cap) is going up from 16.06p per day to 31.07p per day (93% increase). The justification?

      “Ofgem have announced that due to rising wholesale energy costs the maximum amount suppliers can charge customers on variable or default tariffs has increased. Due to these increases your energy prices will rise, blah blah blah.”

      We picked this provider because it was not-for-profit and fair for all – all customers paid the same and only paid for what they used, no standing charge, whether on a pre-pay meter or paying by direct debit. I guess their right-on credentials are not so robust after all. We’ll have to move to a not-so-right-on outfit. (The company’s called Ebico by the by.)

  6. Derek Buxton permalink
    March 7, 2019 2:15 pm

    Yes, I also got my notice of a rise in my Energy price, I do wish we had a conservative government as wot we voted for???? I blame Deben, I wonder what his cut is from the new windfarm?

  7. March 7, 2019 2:21 pm

    ” Gas prices in particular are back down to levels seen last spring, after peaking last autumn.”
    …. is that to do with the way demand rises in the Northern-hemisphere winter and then falls back in the winter ?

    • March 7, 2019 5:33 pm

      Don’t think so

      Prices were very low in winter 2017/18

      • It doesn't add up... permalink
        March 8, 2019 9:34 am

        The UK now has an element of seasonal gas pricing again because we have so little storage. The grid has been keeping storage fairly close to full, both in the Cheshire salt caverns and at LNG terminals. Currently prompt gas is only around 45p/therm, whereas next winter is trading around 60p/therm. However the price spike was really tied to the oil price which peaked last July, and ran as high as 80p/therm.

        In effect I think we are still paying for the Beast from the East, where demand far exceeded hedged volumes, and prices peaked at 499p/therm.

    • March 7, 2019 9:29 pm

      My typo
      “and then falls back AFTER the winter ?”

  8. March 7, 2019 2:38 pm

    And what’s the naive metrolib journo going to say ?
    …. “Of course energy is getting cheaper, thats cos magic-green energy is in the market and pushing down prices,
    you cannot deny that less fossil fuels are being bought to fuel UK power stations”

    Now UK power plants are using less fossil fuels, partially due to the way UK industry is overshoring to places with lower energy prices, and also Drax and biofuel being used more.
    Those journos won’t bother to look as far as world fossil fuel usage being at ever increasing levels due to the way developing countries are growing ..and the way renewables are a tiny tiny portion of world energy supply.

  9. NeverReady permalink
    March 7, 2019 3:33 pm

    If oil prices are $55-65 a barrel, why haven’t pump prices for petrol/diesel also decreased? Pump prices used to be tied to oil prices, but this doesn’t seem to have been the case for some years now.

    • MrGrimNasty permalink
      March 7, 2019 4:33 pm

      Oh there is a tie – It’s a ratchet mechanism – in case you hadn’t noticed. The pound performing better against the dollar should also feed through – it doesn’t.

    • March 7, 2019 4:34 pm

      Your own government is the problem here, with around 65% of the price you pay being various taxes.

      • It doesn't add up... permalink
        March 8, 2019 1:57 pm

        The government has not raised taxes on motor fuels for some years now. It was last increased in 2011 to 57.95 ppl, with VAT at 20% on the whole pump price for both petrol and diesel. Net of tax price can be calculated by taking 5/6ths of pump price and then subtracting duty. There are 3.785 litre per US gallon if you want to compare with US prices. $/£~=1.30.

    • It doesn't add up... permalink
      March 8, 2019 9:41 am

      Petrol prices are now noticeably lower than diesel, and although they have crept up a penny or two, they are certainly much lower than last summer. Diesel prices are supported by the extra demand from shipping, which must convert from cheap 3.5% sulphur fuel oil to a 0.5% sulphur fuel by 2020. That is expected to add 3 million barrels a day to diesel demand, straining the capacity of refineries to produce it and increasing their costs.

  10. Saighdear permalink
    March 7, 2019 3:43 pm

    …………….. hoooooh! – just confirms what I’d heard and believed since some time – YET DERV prices are higher now than for a long time – just risen again last week Urban Highlands £1.32ppl for DERV and £1.23ppl for basic Petrol ( at the NOT Supermarkets ). Yet No-one has squeaked about it and Lots of folk complain , but continue to use, the cheap awfulmarket cheaper fuel without additives except water ( so they say) and complain about the repair bilss for their DIesel cars. What DO they do to them to get that grief?
    Yet we continue to encourage idiot politicians to continue along this stupid energy trail……

  11. MrGrimNasty permalink
    March 7, 2019 4:35 pm

    As I said before, my electricity bill goes up 11.5% in April, switching makes only a tiny dent in that rise.

    • Gas Geezer permalink
      March 7, 2019 5:56 pm

      Yes I’ve noticed that politicians seem to have gone all quiet on the switching front , all they whine on about these days is “dumb meters” . Extra Energy went bust on us which is fine except that we were substantially in credit with them . Ofgem appointed Scottish Power as our new provider, assured us that the credit would be carried over to the new account this didn’t happen and now there saying Extra Energy administrators will write to us…needless to say we are still awaiting our cash.

      • MrGrimNasty permalink
        March 7, 2019 7:38 pm

        The switching always was nonsense, if you have switched away from a bad variable tariff (which won’t even offset one increase these days), any further significant savings are impossible to find. Switching is a one-off saving, perhaps offsetting one price increase when they are coming several times a year now and forever!

        And the competitive upstarts in the power market seem to keep going bust when it comes to paying their renewable obligation certificates (green tax).

      • It doesn't add up... permalink
        March 8, 2019 9:50 am

        I’m afraid the plethora of “cheaper” providers are high risk, especially when wholesale power prices are rising. They are poorly placed to run forward hedges, which require large sums in collateral. They tend to be more successful in falling markets, when the hedges have locked big suppliers into higher costs. Another hazard is that once they become too popular (250,000 customers) they are no longer exempt from having to pass on a share of green costs, so they are forced to jack bills to cover that, but it imposed a cashflow deficit because they pay out before they can collect.

  12. Stephen Lord permalink
    March 7, 2019 8:33 pm

    There is so much undiscovered oil and gas. The oil companies stop looking when they have a 30 year supply because there no benefit to paying to discover it that far in advance. We do know the US has at least 100 years of gas. Canada has 300 years of tar sands. ANWAR will brin Alaska production back up. Probable sale to Japan. US IS EXPORTING OIL NOW. The UK should get fracking if it wants to survive after Brexit.

  13. It doesn't add up... permalink
    March 8, 2019 7:33 pm

    An interesting set of observations on gas price trends:

    https://timera-energy.com/europe-asian-gas-prices-slump/

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