Why is energy getting so expensive is it because of brexit

[LovelyYellowLabrador]

Why are the prices going up so much ?

It is very complex and there are plenty of articles online discussing the myriad factors that are feeding into this.

It is primarily because demand is exceeding supply.

Global supply and demand issued increases crude oil

Ukraine war reduces supply hence increases wholesale cost
inflation - as a result covid probably

plus in the uk, possibly the monopoly held by the big six energy companies

www.bbc.co.uk/news/uk-northern-ireland-58558645.amp

Above should say: increased crude oil price

It's not because of Brexit. Energy price are high everywhere.

The unpopular truth is that we've had years and years of underinvestment in energy infrastructure because of the green agenda. Billions have been spent on environmentally friendly solutions which ultimately do not work anywhere near well enough to plug the gap from fossil fuels.

Thanks will read link, just feels like everything has gone downhill since brexit

but I know there been covid and the war too
just so worrying

Wish utilises where never ever privatised same with public transport
I get they the utilities would still be really high but at least it would be more straightforward

Covid and the Ukraine war are catalysts that made this worse now but the underlying fundamental causes are increased demand especially from Asia due to economic growth over the past couple of decades while at the same in the west we've been disincentivising investment due to the environmental / green agenda which has artificially constrained supply.

People were quite happy with privatised utilities when increased competition meant lower prices.

Well the devaluation of the pound hasn’t helped has it, it dropped 20% overnight after the vote and continues to slide, one can surely assume that business confidence is not running very high wrt the prospects of this country right now. Of course a bunch of those that backed Brexit made a ton of cash for themselves at that point but let’s not mention that eh. Here’s a Union Jack instead.

Its true to say it’s a global problem but as with many of these problems, Brexit makes it slightly worse for us as our currency has lost a lot of value.

Brexit is a red herring in this (at least for the moment).

For 20-25 years, globalisation combined with cheap money and 'just in time' management of goods and services, has conditioned us to cheap on tap consumerism. Covid played the biggest role here in switching that engine off. Humans are playing at being humans and many chose to 'reset' their lives and careers with the 24 month sabbatical that Covid gave us. This is not a UK phenomenon but is happening around the world, though mostly in democracies. It takes time to restart the global economic engine, and along the way one or two people will throw a spanner in and try to take capital advantage, like Putin's land grab in Ukraine and Bolsanaro's pillage of the Amazon. These do not help. I think however that we will not return to how it was as we approached the Millenium. The seed has been sown for two world orders. Democracies and Autocracies. The world has become smaller in each sphere and of course more dangerous.

Well... they thought prices were lower, and they might have been for a year or two. I reckon the real reason that so many people were in favour of utilities privatisation was that they got some free shares out of it.

The trouble with privatised companies is that keeping the shareholders happy is prioritised over customer service.

And of course, it doesn't help that many of our utility companies are almost wholly owned by overseas conglomerates who can hold us to ransom whenever they feel like it.

I reckon the real reason that so many people were in favour of utilities privatisation was that they got some free shares out of it.

How many people got free shares as the result of state owned energy supplier privatisation? Did anybody?

Brexit has certainly not helped!

Exactly. Like privatised building societies, insurance firms, etc - people were happy to bank their windfalls at the time, but now whinge about higher prices, lack of competition, etc. People were happy to get discounted shares "Don't tell Sid", in the utilities markets when privatised and then sell them for a healthy profit, to the very people they now whinge about (i.e. the big shareholders etc!).

Not free, but heavily discounted. Most of the utility privatisations allowed people to subscribe for shares for around £100-£150, and many, if not most, sold within the first few days for substantial profits.

A couple of points on this because it doesn't really paint a full picture.

The pound dropped 20% against the US DOLLAR. Against the euro the pound is actually trading at around the same levels seen in 2013/2014 before the Brexit vote. If you want to point to evidence of USD exchange rates then it's fair to point out that nearly ALL currencies are performing badly against the dollar. For example, the euro is at its lowest point for well over a decade. There are hardly any that have strengthened against the dollar which indicates the moves are more to do with US interest rate policy than anything specific to the other countries. A notable exception is the Russian Ruble which is the best performing currency this year. Make of that what you will!

Inflation data across the euro zone, the U.S. and the UK is broadly similar at around 9% which kinda proves that the increase in costs isn't any worse in Brexit Britain!

I imagine you've been reading the guardian which is very selective on the way they report economic and FX data as they are just an activist publication that will twist anything to push a point (in this case, an anti-Brexit point). They don't care if they are misleading their readers so it's always worth digging a little deeper or just ignoring them completely.

There seems to be knowledgable people on this thread so can I ask when/how do you think prices will drop again or at least stabilise? Will that happen at all or will energy prices continue up year on year?
What would it take realistically to bring prices down?
I know none of you know for sure but what do people think?

I can't imagine that prices will keep going up year after year because it's just not affordable but they may stay high. For them to actually come down a few things in combination could help drive this:
-A big recession would drive down demand (sorry probably not what you wanted to hear!)
-A Russia / Ukraine resolution could help in the short term but wouldn't eliminate the problem by all means
-The uk government could approve licenses in the North Sea for new gas fields (this runs contrary to climate goals)
-Uk government could commit to keeping all the coal plants open (we are supposed to be closing them for environmental reasons)
-More investment in energy infrastructure (but not renewables as sadly they aren't efficient enough)

It's a pickle indeed.

Russia has cut supply of gas to europe. This has pushed up wholesale prices. Basic supply and demand issue

The dollar has strengthened due to interest rate rises in the USA (to reign in inflation caused by supply chain disruptions, think russia, china, and possibly expansive covid relief programmes, not sure about that one though) and because dollar is a safe haven currency when people think there is a risk of recession for example they may shift their money into dollar denominations, Rate rises and money moving strengthen the dollar, unfortunately we all buy our oil and gas in dollars. Combine that with a negative outlook for the UK forecasted by the IMF and OECD (I really wouldn’t but money on their forecast tbh).

So rates in the UK will have to rise in-line (or thereabouts) with the fed to prevent importing inflation.

The IMF and OECD forecast probably have something to do with a negative outlook on the Uk economy but you have to remember that the Euro has reached parity with the dollar. In june last year 1 euro would get you 1.2 dollar now its 1 for 1. 1GBP would get you $1.4 now it’s $1.2. So meh about brexit really.

Thanks for that @Lilgamesh2
So to solve the energy crisis the govt have to throw climate goals under the bus?
That's crap isn't it?

Thank you @Lilgamesh2 for explaining the situation so well.

Well the UK are now out of the EU's internal energy market which means they are in a much less competitive position regarding prices. So yes, Brexit is a factor.

See here: energy.ec.europa.eu/topics/international-cooperation/key-partner-countries-and-regions/united-kingdom_en