I find it amusing that so many commentators still ignore the elephant in the room. The root cause of our energy crises is Net Zero.
The consequence of elite delusion is elite destruction
Nick Collin
1 year ago
I tend to agree that the current energy “crisis” is a panic but not with the solution of more state intervention. All my instincts say that the malfunctioning of the market is mainly due to meddling by governments (price caps, green levies/subsidies, sanctions, etc) exacerbated by a media which is out of control and by its very nature thrives on crisis and panic. I’d say the same about Covid, Net Zero, the NHS, – just about everything which is currently going wrong with our world. If we could just let the free market and private enterprise do its magic I think we’d be in much better shape.
Broadly agree but let’s just drop the “malfunctioning” pretence. Also, I will always take the opportunity to point out the one thing ‘free market’ is not, is free, in either sense. There is a need to curb private enterprise. For example, where there is the risk that a corporation may be more powerful or influential than of the nation state (or trade club nations subscribe to). However the legalised bribery referred to as ‘lobbying’ enables further corruption and the use of tools designed to protect us to be weaponised against us.
Chris Milburn
1 year ago
The author suggests that world governments should just collude to fix prices. That sounds like a great idea. I can’t see how it would possibly set a dangerous precedent.
Henry Haslam
1 year ago
There are two issues, here. One is the world price of gas. Market forces may lead to a reduction of the price. It is also possible, though, that producing nations may reduce supply in order to maintain the new price.
The other is that much of our energy comes from domestic suppliers. Do we have to allow Russia to dictate the price at which these suppliers sell to domestic customers? Does the energy market have to operate by marginal-cost pricing? Is there are team of civil servants and other working hard to see how we can get round this?
Quite so. The UK energy market is anything but free. It is a complex and bureaucratic system designed by civil servants and mismanaged by quangocrats. Kwarteng is allegedly a genius but the fact that he presided over this broken system for three years without apparently seeking to change it in any way makes me somewhat sceptical.
I hope his tenure in No. 11 proves me wrong.
laurence scaduto
1 year ago
Of course, the bottom line is that consumers are going to spend a lot more money and that money is going to wind up in someone’s pocket.
In a “free market”, panic increases profits. Nice work, if you can get it.
Jon Hawksley
1 year ago
“In normal circumstances the market does what it’s meant to do — i.e. send price signals to even out imbalances in supply and demand. But when this mechanism goes crazy it does more harm than good.”
I certainly agree with this – the way the gas market price is determined and what it is used for have created enormous opportunities for proiteering that I have yet to see fully identified and quantified.
“a free marketeer like Liz Truss wouldn’t be getting ready to spend £150 billion on a price freeze if she had any other choice”
This I do not agree with. She simply has not taken a wide enough viewpoint. In times of war and profiteering you do not impose windfall profit taxes but you do impose price controls. Putting all UK sources of energy for heating and producing electricity back to prices a year ago would stop profiteering. A stategy would then be needed for the UKs reliance on imports. Profits on the exports of UK oil and gas could subsidise oil and gas imports which would then leave a need to deal with the sizeably imports from Norway. With them we can plead for more reasonable prices and agree to deferred terms over say 20 years. It could reduce the need for any government borrowing to a fraction of £150 billion.
What is most important is not to be ignorant of the realities in the market place and the abuse that can take place because the mechanisms did not anticipate this scenario.
Nicky Samengo-Turner
1 year ago
Capital markets and the use of derivatives, with the ultimate ” dumb counterparty” of unconditional demand, with no counterparty pricing power makes the killings on the Somme look like a minor incident…
Aaron James
1 year ago
Prices are set at the margins, they say. Supply missing demand by a small amount can have amazing effects.
I do not see supply increasing fast, although can given time, so it will have to be demand decreasing.
Energy use always can be lineally correlated with wealth.
solution, be less well off. This seems to be Liz’s plan, coupled with redistribution and inflation.
I find it amusing that so many commentators still ignore the elephant in the room. The root cause of our energy crises is Net Zero.
The consequence of elite delusion is elite destruction
I tend to agree that the current energy “crisis” is a panic but not with the solution of more state intervention. All my instincts say that the malfunctioning of the market is mainly due to meddling by governments (price caps, green levies/subsidies, sanctions, etc) exacerbated by a media which is out of control and by its very nature thrives on crisis and panic. I’d say the same about Covid, Net Zero, the NHS, – just about everything which is currently going wrong with our world. If we could just let the free market and private enterprise do its magic I think we’d be in much better shape.
Broadly agree but let’s just drop the “malfunctioning” pretence. Also, I will always take the opportunity to point out the one thing ‘free market’ is not, is free, in either sense. There is a need to curb private enterprise. For example, where there is the risk that a corporation may be more powerful or influential than of the nation state (or trade club nations subscribe to). However the legalised bribery referred to as ‘lobbying’ enables further corruption and the use of tools designed to protect us to be weaponised against us.
The author suggests that world governments should just collude to fix prices. That sounds like a great idea. I can’t see how it would possibly set a dangerous precedent.
There are two issues, here. One is the world price of gas. Market forces may lead to a reduction of the price. It is also possible, though, that producing nations may reduce supply in order to maintain the new price.
The other is that much of our energy comes from domestic suppliers. Do we have to allow Russia to dictate the price at which these suppliers sell to domestic customers? Does the energy market have to operate by marginal-cost pricing? Is there are team of civil servants and other working hard to see how we can get round this?
Quite so. The UK energy market is anything but free. It is a complex and bureaucratic system designed by civil servants and mismanaged by quangocrats. Kwarteng is allegedly a genius but the fact that he presided over this broken system for three years without apparently seeking to change it in any way makes me somewhat sceptical.
I hope his tenure in No. 11 proves me wrong.
Of course, the bottom line is that consumers are going to spend a lot more money and that money is going to wind up in someone’s pocket.
In a “free market”, panic increases profits. Nice work, if you can get it.
“In normal circumstances the market does what it’s meant to do — i.e. send price signals to even out imbalances in supply and demand. But when this mechanism goes crazy it does more harm than good.”
I certainly agree with this – the way the gas market price is determined and what it is used for have created enormous opportunities for proiteering that I have yet to see fully identified and quantified.
“a free marketeer like Liz Truss wouldn’t be getting ready to spend £150 billion on a price freeze if she had any other choice”
This I do not agree with. She simply has not taken a wide enough viewpoint. In times of war and profiteering you do not impose windfall profit taxes but you do impose price controls. Putting all UK sources of energy for heating and producing electricity back to prices a year ago would stop profiteering. A stategy would then be needed for the UKs reliance on imports. Profits on the exports of UK oil and gas could subsidise oil and gas imports which would then leave a need to deal with the sizeably imports from Norway. With them we can plead for more reasonable prices and agree to deferred terms over say 20 years. It could reduce the need for any government borrowing to a fraction of £150 billion.
What is most important is not to be ignorant of the realities in the market place and the abuse that can take place because the mechanisms did not anticipate this scenario.
Capital markets and the use of derivatives, with the ultimate ” dumb counterparty” of unconditional demand, with no counterparty pricing power makes the killings on the Somme look like a minor incident…
Prices are set at the margins, they say. Supply missing demand by a small amount can have amazing effects.
I do not see supply increasing fast, although can given time, so it will have to be demand decreasing.
Energy use always can be lineally correlated with wealth.
solution, be less well off. This seems to be Liz’s plan, coupled with redistribution and inflation.