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UK govt does not like some market prices

by Jerome a Paris Mon Jan 7th, 2008 at 08:26:31 AM EST

Darling seeks UK energy price talks

Alistair Darling has called for urgent talks on whether sharply rising energy prices are justified, amid fears that energy companies could undermine his anti-inflation strategy and hit the poor.

Oh, boo-fuckin-hoo. After years of telling us how great the UK liberalised market is, and how competition allows for price signals to let consumers and producers take the best decisions as to their energy spending or investments, they have to ask if price increases are justified??

Well, either it's a functioning market, and price increases are justified by some combination of higher demand and lower supply, or it's not a functioning market and can we please stop the sanctimonious lesson-making about deregulation?

Except ... of course, if it's somehow because of Brussels and evil continental companies abusing the poor Brits. Yep, as expected, that ugly argument, together with putting the blame on evil Russians, has come up. More below.


Mr Darling wants reassurance that energy companies are not using the short-term wholesale price fluctuations as an excuse to push up prices, when most have long-term energy contracts.

What a stupid, stupid argument. Market prices are set by demand and supply, not by production (or supply) costs. That's the whole point of marginal pricing: the price for ALL sellers is that of the most expensive unit needed to clear demand. If demand is high, and requires supply from expensive providers, then those with low cost supplies make a lot of money. This is economics 101.

Don't they even know how a market functions? Gah, the hypocrisy is just staggering (just as, frankly, is the ignorance of the public that can still be taken by such arguments).

Mr Darling’s aides say the meeting does not reflect any criticism of Ofgem, which does not regulate energy prices in what is deemed to be a competitive market.

The chancellor does not have any formal powers to intervene, but his involvement will increase pressure on the energy sector to explain what are expected to be a series of big price rises.

We have a great market, and a great regulator, so we're not at fault. It's those pesky suppliers (who all happen to be foreigners, so we can bash them without restraint).

And in a free market, of course, suppliers do not have to justify their prices - the market takes care of that: either they sell at that price, or they don't sell. and if there were collusion or anti-competitive behavior, surely the anti-trust authorities would get involved, right, rather than the Chancellor of the Exchequer? This gets soooo confusing.

The prospect of UK consumers being hit by soaring energy bills is not only bad news for the government drive to hold down inflation, but could have wider ramifications in the rest of Europe.

Britain is seeking to open up the EU energy market, citing the UK’s deregulated sector as a model. France and Germany claim that a fragmented sector has led to a lack of long-term investment in new supplies and infrastructure.

Sadly, the article does not pursue that point. what would be the ramifications for the rest of Europe? Yet another proof that deregulation does not work and must be stopped and reversed? Or a new push to push the UK's insane system to the rest of Europe so that our system get to be just as fucked up?

The article gets tantalizingly close to admitting that it is the former, but does not quite state it. I guess we'll take small victories where we can...

Centrica, meanwhile, said demand for UK gas was also strong from continental Europe. European energy suppliers that need gas at short notice tend to buy it from the more competitive UK market, increasing demand.

Ah, back to the script. The UK market is more competitive, thus cheaper, and thus UK gas gets pinched by evil continentals. What's the complaint about, again? If prices are lower than on the continent, surely that's a good thing, and an argument that can be used to show that liberalisation works?

Or are they somehow arguing at the same time that continentals are abusing the UK market by selling higher than they could, and yet buying on that same UK market for cheaper than elsewhere?

How stupid do they think we are? Plenty, obviously.

So, either

  • the UK market is truly cheaper, but price increases are still intolerable, and thus the whole focus on market prices is politically intenable, as prices can go up as well as down. Better go back to fixed prices, then;
  • or the UK market is not realy cheaper, and the arguments about liberalisation being the most efficient way to lower prices become quite tenuous too.
I wonder which one is the most inconvenient. Oh wait, it's only because of Putin and Brussels that this is even happening!

Display:
Migeur suggested that a LTE be drafted from ym intial comment in the Salon:


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.

I'll let you guys have a try, for once.


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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 7th, 2008 at 08:29:10 AM EST
Proposal... without the pres and post with references..

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

by kcurie on Mon Jan 7th, 2008 at 09:52:49 AM EST
[ Parent ]
My attempt:

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.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jan 7th, 2008 at 11:37:03 AM EST
[ Parent ]
Europe meanwhile
Eh, hem, the REST of Europe.
by someone (s0me1smail(a)gmail(d)com) on Mon Jan 7th, 2008 at 11:44:35 AM EST
[ Parent ]
Yep - good catch. I may have been pretending to be a semi-typical reader a little too hard there. :)
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jan 7th, 2008 at 12:32:02 PM EST
[ Parent ]
Uh, huh. A likely story. Sure it's not the 'Brit' part of ThatBritGuy acting up??
by someone (s0me1smail(a)gmail(d)com) on Mon Jan 7th, 2008 at 12:43:39 PM EST
[ Parent ]
"Empire - I has it."
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jan 7th, 2008 at 12:52:40 PM EST
[ Parent ]
I buy it..

it is up to jerome now to take the different option in the thread and submit it with minor changes...

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

by kcurie on Mon Jan 7th, 2008 at 11:57:39 AM EST
[ Parent ]
Some suggested edits:

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.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 7th, 2008 at 03:35:04 PM EST
[ Parent ]
final sentence "to be lagging".
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 7th, 2008 at 03:37:34 PM EST
[ Parent ]
I think what you have will do more or less fine, not that it will be published, because it identifies and goes against the dominant narrative you describe.

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!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 09:56:04 AM EST
[ Parent ]
My first comment ever -after various months of passionate reading- and it's a critic! Sorry about that.

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)!

A free fox in a free henhouse!

by Xavier in Paris on Mon Jan 7th, 2008 at 10:42:04 AM EST
[ Parent ]
Bienvenue, Xavier!

I also included more implicit criticism of what Frank wrote in my LTE draft.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 7th, 2008 at 10:45:35 AM EST
[ Parent ]
Thanks a lot...

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...

A free fox in a free henhouse!

by Xavier in Paris on Mon Jan 7th, 2008 at 10:52:23 AM EST
[ Parent ]
ET TU DoDo!  give me credit for trying to understand the dismal science and its abysmal practicioners...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 11:45:14 AM EST
[ Parent ]
doh! even my physics 101 is getting rusty!  Anyway, I only intended as an analogy...red face...slinks into background...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 11:40:02 AM EST
[ Parent ]
Welcome

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Jan 7th, 2008 at 12:04:19 PM EST
[ Parent ]
to the thermodynamic law of entropy whereby the "disorder" of a system is constant?

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.

by Cat on Tue Jan 8th, 2008 at 04:04:27 PM EST
[ Parent ]
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.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 7th, 2008 at 10:09:11 AM EST
[ Parent ]
I'm writing an LTE draft of my own, BTW, should be ready in half an hour.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 7th, 2008 at 10:21:12 AM EST
[ Parent ]
I can't help but think of California electrical deregulation.

aspiring to genteel poverty

by edwin (eeeeeeee222222rrrrreeeeeaaaaadddddd@@@@yyyyaaaaaaa) on Mon Jan 7th, 2008 at 11:25:45 AM EST
[ Parent ]
This from the 2003 Danish Competition Authority report A Powerful Competition was interesting, particularly this  

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).


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jan 7th, 2008 at 12:39:13 PM EST
[ Parent ]
It is not clear to me whether FT takes a view in that article supportive of the government. On this basis, below I'll try to separate criticism of the government and the general British economic elite view as represented by FT's editorial line.

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.

236 words with link.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 7th, 2008 at 10:41:12 AM EST
[ Parent ]
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.

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.

A free fox in a free henhouse!

by Xavier in Paris on Mon Jan 7th, 2008 at 10:48:23 AM EST
[ Parent ]
Unfortunately, making that point would need the addition of qualifications, given that it already happened/is happening throughout the continent (even if least in France).

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 7th, 2008 at 11:46:01 AM EST
[ Parent ]
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.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Mon Jan 7th, 2008 at 12:20:47 PM EST
[ Parent ]
My draft LTE.  Possibly needs a bit more punch. - any suggestions?

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!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 01:38:57 PM EST
[ Parent ]
Brilliant, Frank! Given the use of schadenfreude it's clear you're getting into broadsheet territory, though. I suggest:

...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...
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 7th, 2008 at 03:18:32 PM EST
[ Parent ]
Very good additions. Now, French ==> FROGS and Germans ==> JERRIES throughout makes it even better!
by someone (s0me1smail(a)gmail(d)com) on Mon Jan 7th, 2008 at 04:00:47 PM EST
[ Parent ]
I was going for subtlety myself, no need to mention the war old chap ... just a faint suggestion of those ungrateful frogs and Nazi Germans  .. without lowering the tone too much...its not the British way, you know - certainly not the FT - although it is going rather tabloidy of late..

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 08:00:59 PM EST
[ Parent ]
its not the British way

You don't read the Sun? :-(

(No, don't bother... ;))

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jan 8th, 2008 at 01:29:20 AM EST
[ Parent ]
<head explodes>

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Jan 7th, 2008 at 10:47:02 AM EST

I was quite nonplussed to see the Chancellor of the Exchequer wanting "reassurance that energy companies are not using the short-term wholesale price fluctuations as an excuse to push up prices, when most have long-term energy contracts" ("Darling seeks UK energy price talks", 7 January).

In a functioning market, the price will be set at the level that balances supply and demand, irrespective of the actual costs of supply. Sellers will not sell below their cost of production, and the price will be set by the highest price of all the suppliers required to provide for the corresponding demand. Suggesting that energy companies could sell at their average cost of supply rather than at marginal market prices indicates one of two things: either the much-lauded UK energy market is actually not functioning properly, because of bad design or poor regulation, or the Chancellor is ignorant of basic rules of economics. It is inconceivable that he may be thinking that the public is ignorant of such rules and that he can get away with such blatant politicking.

it is quite ironic, after twenty years of deregulation and claims that "the markets will provide", to see senior politicians panic as prices go up, and go for the easiest non-market solution around: blaming foreign energy groups and Brussels.

In any case, after 20 years of the UK lecturing continental Europe that it was silly to have an "energy policy" because "the market provides", it is quite ironic that anyone in the UK would complain about having exactly what was desired: ie a market-driven industry, including the rush to produce gas as quickly as possible (driving prices down, and now up as reserves are depleted) and the parallel rush to build gas-fired power plants (profitable when gas was cheap and plentiful, but creating a huge and durable supply requirement exactly as gas runs out). The piecemeal sale of the industry after its breakup, mostly to foreign utilities then widely mocked for overpaying by caring more about size than profitability, has created the desired competition but now makes it extremely difficult to define and apply any long term policy, and the lack of coherence in investment now has very real consequences on prices and security of supply.

But it's so much easier to blame the other Europeans, especially those that warned precisely that this would happen.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 7th, 2008 at 05:15:58 PM EST
the third paragraph makes similar points to the 4th paragraph. Or at least echoes the 20 years and ironic bits.

Can't suggest an alternative myself; as I don't read the FT I don't know the house style.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Jan 7th, 2008 at 06:01:59 PM EST
[ Parent ]
It is quite ironic, after twenty years of deregulation and claims that "the markets will provide", to see senior politicians panic as prices go up, and go for the easiest non-market solution around: blaming foreign energy groups and Brussels.

In any case, after 20 years of the UK lecturing continental Europe that it was silly to have an "energy policy" because "the market provides", it is quite ironic that anyone in the UK would complain about having exactly what was desired: ie a market-driven industry,

The first lines of these two paragraphs are the same. I think you should merge them:

In any case, after twenty years of the UK lecturing continental Europe about deregulation and claiming that it was silly to have an "energy policy" because "the market provides",  how anyone in the UK government could complain about having exactly what was desired: ie a market-driven industry? It is quite ironic to see senior politicians panic as prices go up, and go for the easiest non-market solution around: blaming foreign energy groups and Brussels.


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Mon Jan 7th, 2008 at 06:05:12 PM EST
[ Parent ]
But it's Centrica and the FT blaming foreigners.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 7th, 2008 at 06:38:36 PM EST
[ Parent ]
My experience of writing LTEs as a private individual to the Irish Times is that they don't allow you to make more than one main point and perhaps a couple of supplementals.

Your central point seems to be the irony of British ministers complaining that their "market" solution is doing precisely what it is mean to do, i.e. raising prices as demand exceeds supply - and now advocating the sort of market distorting measures they have been lambasting the "Europeans" for for the past 20 years.

I don't think you will get away with saying much more - certainly not the economics lesson in pricing, although it may be worth saying all of this is the natural consequence of the privatisation of utilities and the rapid and wasteful depletion of reserves.

It's a pity, but LTEs don't tend not to be the place for detailed argument - unless you are a famous economist or can claim to speaking on behalf of a well known and influential body.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 7th, 2008 at 08:20:31 PM EST
[ Parent ]
I agree with Frank, there are too many points crowding into this one. Suggest:

I was quite nonplussed to see the Chancellor of the Exchequer wanting "reassurance that energy companies are not using the short-term wholesale price fluctuations as an excuse to push up prices, when most have long-term energy contracts" ("Darling seeks UK energy price talks", 7 January).

Market prices are set at the level that balances supply and demand, irrespective of the actual costs of supply.  Suggesting that energy companies could sell at their average cost of supply rather than at marginal market prices indicates one of two things: either the much-lauded UK energy market is actually not functioning properly, because of bad design or poor regulation, or the Chancellor is ignorant of the basic rules of economics. It is inconceivable that he may be thinking that the public is ignorant of such rules and that he can get away with such blatant politicking.

After twenty years of lectures on the irrelevance of "energy policy" compared to market solutions, it's surprising to hear British complaints about the market-driven industry the UK has done so much to bring about. More sadly predictable, however, is that senior politicians should panic as prices go up, and go for the easiest non-market solution around: blaming foreign energy groups and Brussels.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jan 8th, 2008 at 02:28:23 AM EST
[ Parent ]
Will send it as suggested a bit later today, unless more edits are forthcoming.

I would suggest that others give it a try too (especially Frank's - it's funny enough that it might be published!)

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

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 8th, 2008 at 04:10:44 AM EST
[ Parent ]
Agreed. I'd also send mine if you think it makes sense (e.g. do you think prices would rise for the rest of the EU if adopting the UK free market?)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Jan 8th, 2008 at 08:37:49 AM EST
[ Parent ]


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