If wholesale energy prices have risen massively, how come.....

[Rampxoxo]

Energy suppliers are making humongous profits? Surely, if they are paying loads to buy energy wholesale (in order to supply us customers) , their profit margins would not be huge.
I am probably dim, but I'm not getting it.

They aren't, you've got producers mixed up with retailers.

The retailers, i.e. the energy companies we pay our bills to, aren't making huge profits. Unless they're also producers.

There is a difference between energy producers and energy resellers. Most energy companies in the UK are resellers.
The producers are making big profits because the trading price of commodities has risen. It would have been nice if you’d shown concern in April 2020 when oil fell to $18 a barrel. The producers weathered those months with no handouts.

As above it's the producers making the profits not the suppliers. Hence the huge amount that have gone out of business.

The price cap is forcing suppliers to sell at a loss.

Which energy suppliers are making humongous profits?

They're not, that's why lots of them have folded and customers have had to be reallocated to other suppliers.

You are confusing suppliers with producers.

Why are energy producers allowed to make such massive profits then? Doesn't anyone regulate them?

I tgi

There’s no law against making profit. That’s literally what a private company exists for.

It's the free market. A global free market at that. Many people (and countries including our own) are fervent believers in capitalism.

Yes how come producers are making these huge profits? Are they companies outside of the uk? Are they companies that have shareholders in our uk government?

They're selling to a global market. How do you propose regulation could fix prices globally?

Aw, so sad 🤧

Energy producers are global companies eg Qatar gas - they've got nothing to do with the UK so we can't 'regulate' them

OPEC the legal cartel

I assume that British Gas is both a producer and supplier then as British Gas has apparently made huge profits.

Centrica is the owner of British Gas. The latter does not produce, they merely supply. And they made a loss almost every year for the last five.

That is interesting. Thank you.

For simplicity purposes let's say their profit margin is 10p in every £1. Last year, each person spent £1000 on fuel a year so that's £100 profit per person.
Now we are spending £3000 per year on fuel so the profits are £300 per person.
The profit margin is the same but its costing more so they are making more money for the same product.
This is the way I think of it anyway, someone will probably come and tell me it's wrong in a minute!

The suppliers have been hampered by the price cap, which doesn’t reflect the wholesale costs they now pay. This is why they were making losses, even with record high prices for the consumer. Businesses are the only ones paying true rates all the time.

The producers have been making more profits because the cost of extraction hasn’t changed, but the supply and demand curve has shifted so that prices have risen as every nation on the planet bids for limited supply on the export market.

A lot of the suppliers are subsidiaries of bigger conglomerates. And those bigger conglomerates also have subsidiaries that are producers.

They buy from and sell to themselves, effectively.

The suppliers that don't have parallel producer arms are the ones that have gone out of business. Because surprise surprise they couldn't pay what the producers were demanding.

It's bent. Like multi layered cartel bent. But they tell us it's a free market and there's nothing they can do except charge us shit loads of money for energy they're buying from themselves.

Economics 101, question 1:

Given supply x and demand x2, what is expected to happen to price?

It's different arms of the same company. Different wings in the same building. Different people sat at different desks but paid from the same roll.

Just how do you imagine those price negotiations go?

• oh hello, person from a nominally different part of the same company as me. How much would you like to pay me for my gas?

• fucking loads, because I'll pass on the cost to my eventual customer. Ofgem has just lifted their cap by a couple of grand so we can do whatever the fuck we like.

• what about the government? Won't they be pissed off?

• there isn't one.

• sweet.

Then it will blow your mind when you realise where money comes from in the first place.

• Central bank approves reserves with registered retail banks
• Retails banks create loans to consumers with interest added
• Consumer repays loan with interest
• Government taxes consumer and business income

None of this changes that one arm of a company can lose money and another can make it. The losses are offset by the profits of the other arm, but those losses still exist in EDITDA and are still real. You're only seeing a problem because: a) they're making a LOT more profit in a tight market on the production side of things, b) no one gives a shit about suppliers when they're finding personal finances to be a concern.

Where was the outrage when these companies were losing money and pulling out of retail because it wasn't cost effective? Remember Npower? Guess why they don't have customers anymore.

Lol. Of course nobody cares about npower. Npower were just crap sharks who got eaten by bigger sharks. Your average Joe on the street doesn't give a shit which supplier they have, as long as they're not getting overly fucked by it. No one ever in the history of the world woke up and said to themselves "oh I know what I'll do today : I'll treat myself to a new energy provider. What fun!"

All that people want is to be able to use the functions of their homes in the manner in which they are designed, without spending too much of their take home on it.

And when more money is demanded from them, they do not want to hear bullshit about "supply and demand" and "international markets" from an absentee government whose erstwhile cabinet has many sticky fingers in many personal international monetary pies.