European Tribune - Comments - Countdown to 100$ oil (22) - gas shortages in the UK

Countdown to 100$ oil (22) - gas shortages in the UK - 230$/boe | 17 comments (17 topical, editorial, 0 hidden)

Re: Countdown to 100$ oil (22) - gas shortages in (none / 1)

And, of course, in fully "deregulated" markets such as the California market in 2000 (the nirvana, if you wish), it can be a lot of fun:

In June [2000], the cost of a megawatt hour increased more than fivefold, going from the 1999 level of $30.53 to $170.60. In October [2000], prices doubled over the same period a year earlier, going from $53.47 to $111.04. And in December [2000] -- despite a 1.46 percent decline in electricity usage from the previous December [1999] -- peak wholesale electricity prices hit $425.59. They'd been $31.88 one year before.

Energy is like health care. It's not a market. Short-term choice is always marginal and cannot support serious market mechanisms.

Facts, selfish little bastards. They don't even care about your feelings.

by Francois in Paris on Tue Mar 14th, 2006 at 11:27:04 AM EST
[ Parent ]

Re: Countdown to 100$ oil (22) - gas shortages in (none / 0)

You heretic!

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Tue Mar 14th, 2006 at 11:31:40 AM EST
[ Parent ]

Re: Countdown to 100$ oil (22) - gas shortages in (none / 0)

I was there and I can tell you the heretics came pretty close to burning the orthodoxes alive on a pyre.

Facts, selfish little bastards. They don't even care about your feelings.

by Francois in Paris on Tue Mar 14th, 2006 at 11:34:48 AM EST
[ Parent ]

Re: Countdown to 100$ oil (22) - gas shortages in (none / 1)

So was I, then someone shouted "look, they're going to tar and feather Martha Stewart!" and the heretic mob let the orthodoxes escape.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Tue Mar 14th, 2006 at 11:36:46 AM EST
[ Parent ]

Re: Countdown to 100$ oil (22) - gas shortages in (none / 1)

And then the heretics elected Hanuld Governator ...

Facts, selfish little bastards. They don't even care about your feelings.

by Francois in Paris on Tue Mar 14th, 2006 at 11:51:39 AM EST
[ Parent ]

Peak pricing (4.00 / 2)

Actually, there is nothing wrong in theory with price spikes like these:

they don't apply to large volumes, so the absolute amounts of money involved are not so big even if the headlines are spectacular;
they are required in a market setting to make peakers - i.e. power plants that function only when there is a lot of demand - profitable. As they produce a lot fewer kWh than base load plants, they need higher prices per unit to make it worthwhile. It's a pretty risky business, but it is possible to build a business plan on it.

What goes wrong is the following:

"liberalisers" that do not have the courage to apply their ideology to the end, and liberalise the wholesale market while keeping caps on retail prices (final users are thus artificially protected form higher prices - one wonders why if the goal is efficiency and good allocation of resources; surely high prices would be a signale to end users to consume less, right). That's what happened in California, and the utilities got squeezed between higher wholesale prices and fixed retail prices, and lost tons of money;
market transparency and liquidity becomes essential, and anti-competitive behavior by traders or others must be fought. But that's pretty hard to do against determined cheaters;
as a side note to the above, the requirement to have enough spare capacity, a vital need of the system, should be imposed on all players. The UK electricity market is much better in that respect in that it imposes fair balancing and spinning reserves costs to all, thus making it an even playing field and a well regulated system. Traders are penalised in such a system, but that's how it should be because otherwise they'll just free-ride on the spare capacity provided by others.
on a long term view, the way new entrants are allowed in is an essential part of the regulatory framework (can they get permits easily, is there a NIMBY syndrome that protects existing players, are they allwoed to sign long term supply and sale contracts to secure financings...

All of this shows that deregulated markets are possible, but are much harder to design than most people say, and politicians have rarely gotten it right, ans sometimes spectacularly wrong.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (jeromeguillet@yahoo.fr) on Tue Mar 14th, 2006 at 11:59:00 AM EST
[ Parent ]

Re: Peak pricing (none / 1)

market transparency and liquidity becomes essential, and anti-competitive behavior by traders or others must be fought. But that's pretty hard to do against determined cheaters;

Meaning you have to be very, very heavy handed with people who have a lot of money and influence, which is a recipe for corruption and influence disasters in a liberal democracy.

If heavy handed need be, rather be heavy handed with the real task at hand, producing and managing energy.

I'm not a socialist by any mean and I believe than markets work ... most of the time. But for certain things, it doesn't - exhibit A is health care insurance (as opposed to supplying health care itself, where a large private sector can be accomodated as proven by France). IMHO, energy is exhibit B.

Facts, selfish little bastards. They don't even care about your feelings.

by Francois in Paris on Tue Mar 14th, 2006 at 12:26:18 PM EST
[ Parent ]

agree 100% (none / 0)

based on a number of years in the energy markets, I'd say they mostly work to satisfy the needs of the strongest players. Consumers are disorganized and therefore terribly weak.

by HiD on Tue Mar 14th, 2006 at 06:43:58 PM EST
[ Parent ]

dead on (none / 1)

on all points.

PUC regulation is like democracy... The worst possible system except for all the rest.

by HiD on Tue Mar 14th, 2006 at 06:41:21 PM EST
[ Parent ]

Countdown to 100$ oil (22) - gas shortages in the UK - 230$/boe | 17 comments (17 topical, 0 editorial, 0 hidden)

. Home
. About
. Contact
. New User Guide
. FAQ
. Search
. Search (Google)
. Archives (Wiki)
Art, Economics, Energy, Environment, EU Politics, Mech & Tech, By Country

Username:
Password:

. Make a new account
. Reset password

Recommended Diaries

After Democracy
by marco - Dec 3
32 comments

Not quite the 'perfect fix'?
by djhabakkuk - Dec 3
2 comments

Bugger Thy Neighbour
by redstar - Dec 3
104 comments

Google Translate political bias?
by DoDo - Dec 3
6 comments

Beggar Thy Neighbour
by redstar - Dec 3
58 comments

Friedmanite Folly and the Mugabe Option
by ChrisCook - Dec 2
42 comments

On Rhetoric
by rg - Dec 3
14 comments

Obama commits to Middle East peace
by shergald - Dec 2
5 comments

Recent Diaries

On Rhetoric
by rg - Dec 3
7 comments

Google Translate political bias?
by DoDo - Dec 3
3 comments

Not quite the 'perfect fix'?
by djhabakkuk - Dec 3
1 comment

After Democracy
by marco - Dec 3
16 comments

Bugger Thy Neighbour
by redstar - Dec 3
52 comments

Georgia on my mind...[Updated]
by Frank Schnittger - Dec 3
11 comments

Beggar Thy Neighbour
by redstar - Dec 3
29 comments

Obama commits to Middle East peace
by shergald - Dec 2
5 comments

Friedmanite Folly and the Mugabe Option
by ChrisCook - Dec 2
21 comments

Did the U.S. 2005 Bankruptcy Reform cause the world financial ...
by NBBooks - Dec 2
8 comments

LQD: German surveillance revisited
by dvx - Dec 1
7 comments

Oregon Old Growth and W's Last Minute Timber Deal
by jamess - Nov 30
11 comments

Early Friday Photography Blog No 63
by In Wales - Nov 30
47 comments

Numbers
by Sven Triloqvist - Nov 29
11 comments

Food Market On Tracks
by DoDo - Nov 29
17 comments

Breaking the Bailout
by danps - Nov 29
5 comments

Libya sends 3,000 tons of aid to Gaza SHIP TURNED BACK
by shergald - Nov 28
3 comments

Stimulating whose economy?
by Frank Schnittger - Nov 28
14 comments

US = cheap money?
by Jerome a Paris - Nov 28
102 comments

The Famine Of 2009
by SacredCowTipper - Nov 27
23 comments

More Diaries...

Debates

Campaigns

Occasional Series