Gas prices plummeting, energy bills soaring. The market will regulate itself. /s
1. https://www.ft.com/content/0d84255c-84ba-4462-b80a-859335285...
So who's doing the price gouging? Oil producers? Distillers? Gas stations? Everyone?
Are prices being gouged, or are there intricacies in this system which have compounding price effects on supply and demand hiccups?
Yes, the entire supply chain, at least in my country. It's been news for quite a while.
> Are prices being gouged,
Yes and there's a lot of talk of intervention for that reason, even in the US.
Or is this purely on the basis that you're experiencing high prices so anyone that passes on those price rises are defacto price gouging?
This a false dichotomy. It's been in the news here pretty much constantly, especially in the financial press, to the point it's common knowledge. I'm neither digging up those articles nor translating them for you though. You'll just have to take my word on it (or not.)
Price gouging would show up on the P&L it's very easy to demonstrate. Citing unnamed newspapers and 'common knowlege' doesn't demonstrate anything, or inspire confidence.
Petrol stations tend not to be very profitable. Not knowing where you are I can't say whether you're the exception. But as petrol is fungible, unless you're accusing them of collusion or something I don't see how they could price gouge.
Same with refineries.
So that just leaves the oil drillers. You have got OPEC and stuff, but the average non opec oil drillers have the choice of selling at the market rate or not at all. And I'm not sure how selling at the market rate, be that for massive profits, or a loss is price gouging. Unless you want to devalue the term.
I don't believe in the gouging rhetoric because interested parties benefit from not only high prices, but stable prices, which we haven't seen.
Unstable, skyrocketing prices encourage competition from alternative energy sources, right?
I don't think we have to imagine an alternative to the situation in recent years, but can look to history for context.
If you look at any really long term chart of oil prices, there is a dramatic change in the early 00s, from a regime of fairly stable prices to one where they skyrocket and crash.
I think statisticians have a term for this: heteroscedasticity.
It kind of looks as though energy prices were stabilized deliberately, and then those forces lost control. Maybe it was related to fracking, or the invasion of Iraq. Or maybe it was a reaction to newly perceived fragility of the Saudi monarchy. Or maybe it was because Russia became a bigger player not under the control of OPEC. Or the US, similarly.
Is that because they are colluding?
But they are. Your premise is wrong. This just headlined the Financial times 2 days ago[1]. This and the last quarter have been record profits for energy companies and that's not even counting local profits, which are also at record heights.
1. https://www.ft.com/content/0d84255c-84ba-4462-b80a-859335285...
Gas is still trading worldwide at a price far below it's 6:1 energy value relative to oil, so IMO everyone needs to stuff this "record profits" line right back up their ass where they got it in the first place. There's not a gas shortage; gas is still overproduced and dirt cheap. We do however seem to be long on crybabies that can't buy it at 20:1 anymore.
Financially and politically punishing domestic producers in Europe and the West led to this problem in the first place where it's simply not possible to be price competitive with Russia and the Middle East where the labor, environmental and regulatory standards to produce it are weak or ignored. Nobody seems to give one shit about how much "profit" those suppliers make from the sales, consequences be damned, so long as they give the best price.
Unfortunately, people complain that the government needs to intervene fix a problem that governments were responsible for creating, while using Russia as a smokescreen for the terrible government policies that got us where we are in the first place.
If people are complaining that something is wrong, the answer isn't "well why don't you take advantage too"
Yet, most of them don't seem to be tripping over themselves to collect this free money. It could be because:
* The market has priced in the cost of storing all this gas between now and February.
* Storage is expensive, and is at capacity.
* Building out new storage that only will be useful for a total of two years (Or however long you expect the war to last) is a poor investment.
* An increase in storage capacity will lower the spread between the spot price of gas in October and the price of gas in February, as suppliers price in the increase/reduction in demand
* Europe transitioning to electric (heat pump, baseboard, etc) heating will lower demand for gas.
There's a reason that difference in spot pricing exists.
A rumour is typically enough to warrant an overnight price hike in consumer prices. While for experiencing reductions, consumers have to wait for a few months for the market to "adapt". And in the end, it usually is the consumers that adapt to the increased prices, so companies don't see any good reason to reduce them.
Look at any stock in any stock market that had a highly positive or negative rumour associated. You will see an immediate spike or dip in value and, a slow regression to the mean.
I don't understand why people waste electrons making comments that cannot even be right or wrong without specific data and defined terms.
Which is the case for electricity and natural gas.
Consumer goods that are usually priced at market rate, such as clothing, regularly see deep discounts.
Whom decides what is too much?
That's the theory. Reality: if a company makes too much profit, it's probably a monopoly or have formed a cartel with their "competitors".
However, the recent crisis sent a large number of consumer energy suppliers into bankruptcy, suggesting that actually they'd been keeping too little back rather than fleecing the consumers.
But have you looked at a chart that proves this claim that everybody makes and assumes is true?
The price for gas being delivered today is not the same as the price for gas in January. Because in the meantime, someone needs to store it.
The utility price is higher because the result of longer-term price-locking contracts. The spot price can spike pretty hard, wiping out your gains, as those customers learned then.
(Sorry, I don’t know the standard jargon for some of those concepts.)
Because while I believe it would self-regulate, in a vacuum (or anarchic system), a free market paired with a government means interference, nepotism, laws that favour monopolies and kills competition.
So when people like Liz Truss enter 10 Downing Street and claim they want to enact "free market policies", the result is just utter economic upheaval and chaos that hurts regular people further.
It's still in favour of free speech, just with limits.
The same applies to free markets. If they work as promised great. If not someone needs to step in and fix it.
The rectification of free markets in the US somehow involves massive transfers of wealth to private companies from the public sphere. Essentially just to make sure those companies don't suffer an adverse effects from their bad decisions. I'm not sure what the utility to the public is in this. Do we really need companies that only exist because of government handouts. Why didn't we bail out Enron in that case? What about WorldCom? Or was their mistake just having a Canadian as a CEO?