Gas wholesale prices have dropped 70%

[ivykaty44]

In 4 months going into winter, so why haven’t prices dropped?

in august a therm was 500 but by December a therm us 155

yet we are still paying astronomical prices each month in our direct debits

it’s surely unreasonable that prices haven’t dropped
why isn’t MSM reporting massive price drop?

Where did you get your info from? 70% drop sounds a lot.

Because the energy companies buy futures.

Appalling isn’t it. In the DM today they run a piece saying that gas & electricity prices were unlikely to reduce until 2030’. How on earth are people going to manage, some utilities company’s are increasing their tariffs from 1 Jan. Absolutely ridiculous, families cannot afford these quarterly increases due to changes in the price cap.

@DenholmElliot11

by looking at the price of gas in august and looking at the price in December, the former being 500 the later being 155

is my maths incorrect?

That's the spot price. Energy companies buy futures in advance so they will have bought at a higher price.

gas prices

Appear to be at pre Ukraine war levels

August gas prices

Gas prices always go down in summer due to lack of demand and rise in winter for obvious reasons.....I think you are looking at prices from summer

gogohmm the only time it was the same price was March 22 and apart from that it’s been lower

crimbocountdown That exactly the opposite of what your saying, gas prices were 70% more in the summer than they are now in the winter

Because energy companies buy the gas in advance, they will come down eventually.

1. It is being reported, I read this in the news
2. Prices won't come down unless the regulator amends the cap as energy companies are sods

Privatised energy companies were another shit Tory idea.

They buy it way in advance

energy companies should and do buy gas as futures.

one of the reasons the bulb energy company rescue was so so expensive was that they hadn't bought any/enough gas and electric forward to cover their commitments to fixed price contracts offered to consumers.

Price caps are set based on the average over a certain period, this is explained on the OFGEM website. Unless the wholesale price drops for a sustained period, it doesn't effect the price cap.

The energy trading market is very, very complex op. The likes of BG etc buy gas on futures, have hedges to minimise currency movements. Bear in mind interest rates are rising so finance costs for companies to borrow to buy energy futures are rising and that cost flows through to consumers.

There are also other costs impacting what is charged on to customers - green levies, costs of pipeline maintenance and leaks. Sadly rising prices also are likely mean people resorting to theft from the network too, the cost of which is borne by everyone else.

Bear in mind interest rates are rising so finance costs for companies to borrow to buy energy futures are rising and that cost flows through to consumers.

they use the 2billion of £ in customers over estimated direct debit charges, which doesn’t have an interest rate rise attached as it’s free borrowing

You can find the info on the BBC business pages on their website - or on ceefax (yup, it still works) Business and Markets, then Markets, then Commodities.
Currently showing as 179.24.

Maybe winter (so far) has been milder and less windy wind turbines can't work if it's too windy

they use the 2billion of £ in customers over estimated direct debit charges, which doesn’t have an interest rate rise attached as it’s free borrowing

..... net that off against the customers who owe money who also aren't being charged interest and its a lot less. £2bn also doesn't go far on gas futures, a company like british gas may be borrowing far more than this.

An insightful post from someone who knows the industry.
I think something like 20 energy companies failed in 2021 simply because they didn't buy enough gas in advance on futures contracts to cover themselves when wholesale gas prices rose and had customers on fixed low rate tariffs

I thought the rule was if the wholesale price goes up, you feel the impact immediately. If the wholesale price goes down it takes years for you to notice!

The regulator has already amended the cap from tomorrow - upwards. The price guarantee will also increase very slightly (in my area anyway - I've not checked others).

Octopus at least have said they're not passing on any increases until the price guarantee goes up again in April.

As PP have said, buying fuel is an enormously complex strategic operation. Like it it not, we are all paying for the Ukraine war.

I buy oil for schools in a Trust and it's been nail biting trying to eke out, heat adequately and try and guess when the spot price will drop. I buy at spot from a conglomerate energy company that buys in futures.

I've held my nerve and just bought at 81p a litre, but in September that was 101p! That's a fucktonne difference when you're buying thousands of litres.

@Vitriolinsanity for comparison, how much was it before the Ukraine war, though am aware prices were trending up before that anyway.

Thankful to be an oil user. Gas prices will never go down, and will remain at cap prices as long as their is a cap. The giddy heights of oil prices of 10 years ago have not been reached. Oil users are used to speculatively buying when the price is cheap in a heatwave and and avoiding an empty tank in winter. We pay up front for the actual oil rather than pay cash up front to be held as cash rather than units of gas bought in advance of use. Meaning that by the time we need to spend the cash paid up front on gas our cash buys less gas = more profit for the gas company.

I think I might invest in gas company shares.