What's the word? Oh yes: Schadenfreude. After 20 years of the UK lecturing continental Europe that it was silly to have an "energy policy" because "the market provides", it is frankly pathetic that anyone in the UK would complain about having exactly what was desired: market-driven results, ie a rush to produce gas with no thought for the future in the past decades (oops, now it's gone, how could that be?), a parallel rush to build gas-fired power plants at the same time (which the city loves - so easy to finance, and so many opportunities to sell price derivatives, hedging instruments and other financial widgets)(oops, the evil Russians have all the gas now), and, additionally, the break-up of the industry and its sale in pieces to the stupid stodgy utilities which were widely thought to have overpaid for the assets then (oops, big decisions are taken elsewhere). Markets do not deliver lower prices, they deliver truer prices. And the true price of energy now, if you have not planned infrastructure and supply in the previous decades, is going up, up, up. But it's so much easier to blame the nasty Europeans.
Markets do not deliver lower prices, they deliver truer prices. And the true price of energy now, if you have not planned infrastructure and supply in the previous decades, is going up, up, up.
But it's so much easier to blame the nasty Europeans.
I'll let you guys have a try, for once. In the long run, we're all dead. John Maynard Keynes
Accordign now to (ref article) there has been a dramatic change of attitude and discourse in the UK government and main financial sectors regarding the lasts years of economic policy. It is with surprise that I read how they complain about having exactly what was desired: market-driven results which lead to increase in Energy prices. After 20 years of the UK lecturing continental Europe that it was silly to have an "energy policy" because "the market provides", one can hardly not feel the schadenfreude when the obvious results of such lecturing gets the expected results.
The rush to produce gas in the past decades and a parallel rush to build gas-fired power plants at the same time without thinking in the lack of european reserves , and, additionally, the break-up of the industry and its sale in pieces to the stodgy utilities which were widely thought to have overpaid for the assets necessarily lead to higher market prices.
Markets do not deliver lower prices, they deliver truer prices. And the true price of energy now, if you have not planned infrastructure and supply in the previous decades, is going up. But I guess it is easier to blame the Europeans.
It is just a frist trial... someon takes it from her..
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
According to (ref article) there has been a dramatic change in attitude from the UK government about the last twenty years of energy policy. It is remarkable to see ministers complaining about high prices created by the negative results of deregulation when the current increases were both predictable and expected. After 20 years of rhetoric from the UK about the irrelevance of long term energy planning in favour of overzealous reliance on the markets - which supposedly not only create lower prices for consumers but guarantee stability of supply - it's hard not to feel schadenfreude when the result turns out to be higher prices for consumers and industry, and increasingly precarious supply to both consumers and businesses. The rush to build gas-fired power plants without factoring in the likely effect of minimal European reserves, and the break-up and sale of a functional utility sector at generous discounts is now producing effects which should be no surprise to anyone, least of all Mr Darling and his Treasury colleagues. Unregulated markets do not deliver lower prices and long-term stability, they deliver higher profits infected with rampant short-termism. This creates chaotic supply conditions and makes energy price planning by industry almost impossible. Enron proved this, and now Mr Darling is finding out why he should have perhaps have been paying attention to recent history in the US. Europe meanwhile has understood this for decades; unfortunately common wisdom in the UK still seems to lagging some way behind common sense.
After 20 years of rhetoric from the UK about the irrelevance of long term energy planning in favour of overzealous reliance on the markets - which supposedly not only create lower prices for consumers but guarantee stability of supply - it's hard not to feel schadenfreude when the result turns out to be higher prices for consumers and industry, and increasingly precarious supply to both consumers and businesses.
The rush to build gas-fired power plants without factoring in the likely effect of minimal European reserves, and the break-up and sale of a functional utility sector at generous discounts is now producing effects which should be no surprise to anyone, least of all Mr Darling and his Treasury colleagues.
Unregulated markets do not deliver lower prices and long-term stability, they deliver higher profits infected with rampant short-termism. This creates chaotic supply conditions and makes energy price planning by industry almost impossible.
Enron proved this, and now Mr Darling is finding out why he should have perhaps have been paying attention to recent history in the US. Europe meanwhile has understood this for decades; unfortunately common wisdom in the UK still seems to lagging some way behind common sense.
it is up to jerome now to take the different option in the thread and submit it with minor changes...
According to (ref article), the UK government's attitude to the last couple of decades of energy policy has undergone a dramatic change. It is remarkable to see ministers complaining about high prices created by the negative results of deregulation, when the current increases were both predictable and expected. The rush to build gas-fired power plants without factoring in the likely effect of minimal European reserves, and the break-up and sale of a functional utility sector at generous discounts, is now producing effects which should be no surprise to anyone, least of all Mr Darling and his Treasury colleagues. For twenty years the UK has lectured about the irrelevance of long term energy planning and the virtues of reliance on the markets - which supposedly not only create lower prices for consumers but guarantee stability of supply. It's hard today not to feel schadenfreude when the result turns out to be higher prices and increasingly precarious supply for both consumers and businesses. Unregulated markets do not deliver lower prices and long-term stability, they deliver higher profits infected with rampant short-termism. This creates chaotic supply conditions and makes energy price planning by industry almost impossible. Enron proved this, and now Mr Darling is finding out why he should have perhaps have been paying attention to recent history in the US. The rest of Europe meanwhile has understood this all along; unfortunately common wisdom in the UK still seems to lagging some way behind common sense.
The rush to build gas-fired power plants without factoring in the likely effect of minimal European reserves, and the break-up and sale of a functional utility sector at generous discounts, is now producing effects which should be no surprise to anyone, least of all Mr Darling and his Treasury colleagues.
For twenty years the UK has lectured about the irrelevance of long term energy planning and the virtues of reliance on the markets - which supposedly not only create lower prices for consumers but guarantee stability of supply. It's hard today not to feel schadenfreude when the result turns out to be higher prices and increasingly precarious supply for both consumers and businesses.
Enron proved this, and now Mr Darling is finding out why he should have perhaps have been paying attention to recent history in the US. The rest of Europe meanwhile has understood this all along; unfortunately common wisdom in the UK still seems to lagging some way behind common sense.
There is one question I want to ask you, and that is: Is there an economics equivalent to the thermodynamic law of entropy whereby the "disorder" of a system is constant?
Thus if a large (continental) part of the Euro gas market is strictly regulated and governed by stable long term contracts, then the volatility of the unregulated part of the market (UK) increases dramatically to accommodate imbalances in supply and demand that would otherwise be absorbed over a much larger volumes in the system as a whole.
At times of supply surplus the Brits would be laughing at the "sclerotic" continental system which is paying "over the odds" for gas that is available cheaper on the spot market, at times of shortage the reverse would b the case.
But what we are really seeing is the dynamics of two subsystems in a larger system, one which has been "frozen" into relative stability, and the other which exhibits extreme volatility which might otherwise be dampened over a much larger market.
Of course the overall system or gas market isn't an entirely closed system and changes over time - but at any one time regulation in one part produces relative stability at the expense of volatility in any part that remains unregulated.
Over a period of time, regulation and planning, if done well can anticipate future trends and bottlenecks or surpluses in supply and plan accordingly, and greatly improve the "efficiency" of that part of the system by buying short when prices are high and long when prices are low.
If done on a large scale compared to the size of the market it can influence prices to its advantage by anticipating trends, and it's sheer scale gives it an enormous advantage over a smaller player which simply doesn't have the market intelligence, bargaining power, and financial muscle to influence the market.
I didn't do economics 101, so this is looking for freebee education! notes from no w here
So here it goes: if I'm not mistaken, the thermodynamic law of entropy that was referred to before goes as: "in a closed system, entropy may only increase", translated into "in a closed system, disorder increases". You may have partial ordered areas/sub systems, if the global system has higher entropy/disorder.
I really think that it corresponds to what was intended, but it would need a bit of checking before using the metaphor in answer to the above diary.
Happy new year to all contributors (and readers)!
I also included more implicit criticism of what Frank wrote in my LTE draft. *Traitor*, n. A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.
I know my first comment is not really interesting, relatively to the current issue. It's just that I am of the science/technical persuasion, if i may say so, and this particular law (the entropy one) was one of my favourites at university... ^_^
I'll try to post later a more issue related comment...
Yes, it is called trust, a homeostatic condition denoted by constancy, given that economics is an ideology and entropy is a statistical fact.
In praxis the complement of trust is distrust. Then, mistrust is psychologically and congnitively synomous with entropy, a condion of volatility, actually.
None of which has anything to do with theoretical predicates of price equilibrium. Rather, transaction processing. Diversity is the key to economic and political evolution.
Markets do not deliver lower prices, they deliver truer prices.
Well, truer only in a market-believing mindset. Paying all producers the same as the production price of the most expensive marginal producer might be 'true' for them, but a regulated power provision where the price is closer to the weighted average production price (i.e. in effect the cheaper producers subsidize the marginal producer from their profit), even with room for an investment chest and no need for feeding investors with dividends and interests, might be truer from my point of view. *Traitor*, n. A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.
The Nordic market for wholesale electricity is inherently prone to market manipulation. One special characteristic of the electricity market is that even firms with relatively small market shares may exert market power unilaterally in certain periods. This is due to the mix of the non-storability of electricity and capacity constraints in the production and transmission of electricity
nugget in Chapter Four.
In addition to achieving the objectives outlined by DoDo of profit pooling and sharing among the physical market players, markets should be configured such that trading intermediaries (ie purely financial players) cannot contribute to physical market volatility.
I believe that the market structure I outlined in my recent (August/Sepetmebr 2007) articles in "Energy Risk" achieves both the former - through a "Pooling" mechanism, and the latter by simply and effectively separating the security of price from the security of supply in a new way ("unitisation" of electricity).
From your article Darling seeks UK energy price talks, it seems the government of Britain is finally realising that maybe the market doesn't provide for all. That Alistair Darling is having second thoughts about the government's lack of energy policy is especially ironic in the context of Britain long preaching the same at the EU level. Not that these frantic actions to stave off price hikes will change much, and the arguments raised are rather daft. It's funny to now hear talk of prices as a function of production prices. Prices on a free market are determined by supply and demand. In effect, the price will be close to the production price of the most expensive producer whose supply is needed to meet demand -- and the rest will cash in. When supply is getting tight -- as in a post North Sea boom Britain --, and demand is unchecked -- as in a country with an electricity market switched to gas-fired power plants --, that means rising prices. Centrica also blames the rest of the EU for rising demand, and you make it appear as if this is a result of less free markets. But please, don't take the reader for a fool! A wider free gas market won't result in reduced demand, quite the opposite, and the one siginficant result won't be lower prices for Britain but higher ones everywhere else.
Not that these frantic actions to stave off price hikes will change much, and the arguments raised are rather daft.
It's funny to now hear talk of prices as a function of production prices. Prices on a free market are determined by supply and demand. In effect, the price will be close to the production price of the most expensive producer whose supply is needed to meet demand -- and the rest will cash in. When supply is getting tight -- as in a post North Sea boom Britain --, and demand is unchecked -- as in a country with an electricity market switched to gas-fired power plants --, that means rising prices.
Centrica also blames the rest of the EU for rising demand, and you make it appear as if this is a result of less free markets. But please, don't take the reader for a fool! A wider free gas market won't result in reduced demand, quite the opposite, and the one siginficant result won't be lower prices for Britain but higher ones everywhere else.
236 words with link. *Traitor*, n. A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.
In the last part, maybe you could emphasize the fact that free market has lead to favour gas plants in britain, and would do so too in Europe as a whole, thus further increasing demand for gaz which would in turn results in higher prices on the continent as a whole.
Alistair Darling is having second thoughts about the government's lack of energy policy is especially ironic in the context of Britain long preaching the same at the EU level.
It is not clear to what "the same" refers. "Ne te courbe que pour aimer..." René Char
SHOCK, HORROR: CONTINENTALS DRIVE UP BRITISH GAS PRICES!
Having freeloaded on BRITISH gas for decades the GERMANS and FRENCH now want to charge us EXTRA for giving us OUR SHARE of RUSSIAN gas. Our Minister, Alistair Darling, is fighting to prevent FOREIGN utility companies from exploiting BRITISH CONSUMERS by making EXORBITANT PROFITS, driving up our inflation, and damaging our competitiveness abroad.
Of course there will always be the prophets of doom, naysayers and other continentals indulging in SHADENFREUDE that we gave them our gas so cheaply. That's the thanks you get when you try to help those French people. For years we have propped up their SCLEROTIC economies with BRITISH invention, innovation, flexibility, and know how. They in turn kept their markets closed to our INVESTMENT with all those EUROCRATIC regulations.
Mr. Brown should waste no time to give M. Sarkozy a piece of his mind and tell him we want our gas back! notes from no w here
...prophets of doom, naysayers and other continentals indulging in that old Jerry insult SHADENFREUDE because we gave them our gas so cheap. That's the thanks you get for trying to help people like the French, as we Brits learned at Dunkirk. For years...
its not the British way
You don't read the Sun? :-(
(No, don't bother... ;)) When locusts move on, they leave nothing behind
