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Thankyou a brilliant explanation
I have learned more about how the energy price is decided on these attachments by you than in 6 months of watching the media. I would guess that the UK price is particularly at risk because of us being susceptible to pressures from weaknesses on the £ and lack or storage facility for the energy supplies hence the UK pays more than other countries who donít have these negatives when trying to buy at a reasonable price
they pay what they think it's worth, based on how much they can sell it for. There are many of them and then compete against each other. A company, at the start of the chain, mines or gets gas or coal or whatever in some form of raw material. They then sell it to a company that can refine it into its many different forms. That company then sells it to whoever wants to buy that specific form and it goes on and on. Gas or oil isn't just petrol when it is mined or extracted, there are many different levels between petrol and oil (for example).
But to your question, the companies stock is traded on the stock exchanges across the globe, but the products themselves are given a price that changes based on the demand. Gas isn't sold on the stock exchange but there are various exchange mechanisms involved that people in the industry would live their whole life understanding.
It's all very complicated and certainly not a couple of phone calls between bracer wearing stock exchange types on wall street. Add in restrictions to production and you get manipulation. For example OPEC but in terms of gas, if Russia restricts supply then those buying what is left are competing for it. Think companies with sales and buying teams of hundreds of people doing the whole corporate thing - ultimately yes, it is teams meetings and high level deals for x amount of energy for y amount of £ for z amount of time. But it is all about supply and demand, only the demand is given and the supply is being manipulated.
All very helpful information last question does the mechanics of this happen on trading markets abroad in different locations or just via phone calls from the energy companies to the suppliers abroad I just find it strange that no one in the media has bothered to explain this all they seem to do is say o the energy price is going up again and thatís it
Think of it like a farmer selling wheat of 100kg in total. It comes again next year in a varying amount and the cost of machinery changes as do the wages of the people harvesting it, so the cost of bringing the wheat to the market is variable.
There's 10 farmers wanting to buy 15 KG each. So the price changes based on this, one farmer gets in early and buys 20KG and then the rest realise they are short so they up their bids per KG. In the end, the cost of the wheat goes up because there is a limited supply and lots of demand. The higher they buy it for, the more it costs to turn the wheat into bread because they need to make a profit irrespective of how much they buy it for.
There is no overall body deciding the cost of gas or energy. But if there's a finite amount of it and you say "I'll pay X for it!" then I can come along and say "screw him, I'll pay 1.1x X for it" and then either someone else bids higher or I get it and you dont.
Sorry if that was patronising, didn't mean to.
Where are these decisions taken is this the stock market? What institutions are responsible for deciding the energy price variations?
There seems to be a great deal of coverage in the media about the the energy bills rising but absolutely none of the mechanics to how this is happening and where these prices are decided
Rather than by the time it gets to the end user, then the price is set by what people are willing or able to pay.
If there are 10 barrels and 15 people who all need a barrel each, then the price will be set by the 10 people who are able to pay the most.
If there are 15 barrels and only 10 people then that dynamic is reversed.
Now there are bound to be people who are taking advantage of the situation, but we are here because capacity is stifled and is unable to meet demand. Though that demand might be tailing off as people make decisions not to spend and demand is destroyed.
But thatís not going to save the winter. Itíll not really subside til it gets warmer in the new year id imagine.
And isnít the UK paying far higher energy prices than the rest of Europe
At the moment there have been significant supply shocks due to things like Ukraine which have significantly impacted the capacity for supply. And when these things get turned off they take a long time to turn on again.
Energy prices have come down, but they take a while to feed through to the real economy. And even then, prices will only drop if demand falls and people stop buying.
And we ie the UK have no influence on this for example what would either drive up or lower the price and who decides this?
The wholesale price is the same, if not lower than a year ago.
The weak pound and greedy shareholders are what is driving up profits.
Obviously the Tories are loving this, no matter how much they claim the opposite.
But I meant the price that BG would pay to receive the Energy I just see so much attention paid to these going up in the media but not who is doing this and driving the price up??
Cos they couldnít afford to keep paying me. I ended up being a victim of Ďfire and rehireí, something that is illegal in most countries and is frowned upon even here.
Theyíve just announced record profits of over a billion and started paying dividends to shareholders.
Does anyone know who is setting the prices that the energy companies pay to distribute the electricity and gas to there customers. Yes I get the coming out of Covid-19 and Ukraine war pressures. And I understand the basics of supply and demand but who is setting the wholesale prices is this the speculators in the finance market driving it up?