Why are energy bills going up?

[HauntedBungalow]

The price of oil had a mini-spike three years ago and has dropped back down since. So why are they charging us so much? How come the standing charge is so high? What is the bloody point of ofgem? It's all bent af.

Energy prices are based on the wholesale cost of gas. It’s been increasing over the past few months, and this is passed on to consumers.

Wholesale price of gas. Russia used to be one of the main suppliers. When they invaded Ukraine, that was switched off (to most countries) and everyone was left scrambling to fill the gap. Supply and demand, market forces etc. A lot of electricity is generated using gas turbines.

But the wholesalers and suppliers are different parts of the same organisation. Eg British Gas supplies, Centrica sells wholesale. All of them have a parallel wholesale arm. So they are deciding the price that they sell to themselves. It's not just "increasing" by magic.

They should make less profits rather than charge us more, it’s absolutely ridiculous they’re allowed to keep charging more and more.

Re Russian gas, we're still using it, again there was only a little blip in supply, three years ago.

No, not always. The likes of Utilita and Utility Warehouse don’t operate power stations or oil rigs, they purchase energy on the open market. All suppliers do, as they are required to, by the rules and systems that were set up when the industry was privatised. Competition drove down prices and we had cheap gas for years, which everyone loved.

Oh come on it's not an open market if you literally have one hand selling and one hand buying, two-bit piggybackers like utility warehouse notwithstanding.

It is an open market. Big companies extract fossil fuels and/or run power stations. They sell energy, as a commodity, at whatever the price the market will bear, like steel or coffee beans, Suppliers, including subsidiaries of these companies, buy it at the going rate and sell it to us. That’s the way the system is meant to work. There used to be dozens of suppliers, but most are gone. Most of the remaining suppliers only survived because of the financial clout of their parent companies.

Competition drove down prices and we had cheap gas for years, which everyone loved.

I thought it was global oil gluts that drove down oil and concurrently gas prices. The one in the 1980s coincided with UK energy privatisation. We did of course waste all our own home-drilled oil on tax cuts so long term all of that wasn't so good for us as other countries but there's been an oil glut again since and oil is currently pretty low, certainly not increasing, but our energy costs are. So there's something else going on.

Oil and gas are two different things. The gas wholesale price is currently high, and rising. In the UK, we engaged in the ‘dash for gas’, which involved lots of gas-fired power stations and ever more powerful boilers. Other European countries took a different approach, e.g. more nuclear generation or more energy-efficient homes. Our short-term thinking has now bitten us on the bum, and we don’t like it.

Yes but historically oil and gas have moved together. It's only now that gas is apparently more "expensive".

The Ukraine war terminated Europe’s access to Russian gas, which drove up prices. The UK has a voracious appetite for gas, especially because we use a lot of it to generate our electricity. Our remaining nuclear power stations are getting old and two of them were offline earlier in the winter for maintenance. Gas had to make up the shortfall. We also closed down our main gas storage facility some years ago to save money, and it has only been partially re-opened. In short, our demand for gas is high, and high demand pushes up prices.

Sorry, but that doesn't square. Europe continued to get gas from Russia, it only stopped temporarily. The UK never got loads of gas from Russia anyway as we still have North sea ourselves and with Norway, and what we got from Russia continued also, although like the rest of Europe to an extent via proxy. Is it the proposed reconvened storage facility that we're paying for? It just doesn't make sense that gas is expensive in the UK, a gas production country.

Re: North Sea
The UK sells drilling rights to private companies we don't "own," the gas they do because it costs a fuck of a lot to get gas/oil out of the ground so private companies take the risk, building infrastructure, pipelines, oil rigs

You can drill and find nothing you know or nothing useable

Those companies sell it on the open market.

Actually that is a good point - I know that it's always had international operators including foreign governments but between the Brexit vote and implementation loads of private equity companies moved in on north sea, head offices in TropicalYachtIsland-Land as standard.

Actually what we need is a big investment into hydrogen.

Hydrogen can be pumped through our gas mains, gas boilers can easily be converted, well you know by a professional, but you don’t need a whole new boiler system.

But you know what people are like, they don’t like change and there is a big anti-non-fossil fuel agenda at the moment which has effectively shut down any progress in this area.

A drive for greener energy and renewables does not mean a lowering of living standards but anyone pushing for a more green agenda gets shouted down at the moment so we remain on the fossil fuel price merry-go-round.

Why does you suppose China is quietly developing more advanced green technology and energy solutions right now? The green lobby asked for investment into building a green industry but no that was all hippy nonsense, trying to take away people’s gas boilers and freeze pensioners, yet the same group will be saying the exact same thing about energy bills.

It really doesn’t matter who tries to promote a more greener energy supplies the rightwing media all think it means “the left have won” but actually it just means all us little normal people continue to lose.

And there’s no point posting on a forum when your bills go up “we should be doing this” and then vote in a party each election that won’t.

In five years time our energy bills today will seem cheap.