Why are we paying so much for energy when profits are so high?

M0nica

MaizieD Shells profits are earned in the countries it gets most of its oil and gas from, middle east, Africa, Asia , US and Uk, not necessarily low tax domains.

If you go to an auction, highest bidder gets the goods. How do you suggest energy companies selling their goods at auction control the price, beyond putting a reserve.

At the beginning of the century we had a long period when prices were very low and the energy companies cut back on investment . How do you suggest the price of commodities like oil (and wheat and trees and every other raw material we use) is controlled.

That was whaat the USSR used to do. It was not a world leader in either economic development, growth, the prosperity of its people or the quality of its goods.

How would you do better?

I'm just saying that it seems morally wrong to be profiteering from shortages. The operation of the The Market in this way doesn't work in the best interests of anyone except the profiteering company.

Bet Liz Truss is smiling..she has Shell shares ...

They say they are investing in renewables. Ha! Tell that to people freezing and unable to pay their bills - the ones who’ve contributed to their profits.

"UK Expands Windfall Tax on Energy Firms to Fund Bills Cap
Levy on oil and gas firms to rise to 35% from 25% rate

ByRachel Morison, Todd Gillespie and Will Mathis
November 17, 2022 at 4:33 AM PSTUpdated onNovember 17, 2022 at 5:55 AM PST

It appears, to me, the windfall profits have been addressed.

GrannyGravy13

Firstly I am not defending the energy companies. The prices are excessive, energy was at a premium price the minute Russia invaded Ukraine the wholesale prices are lowering so end user costs could/should come down.

Hopefully these profits will be invested in research and development of renewables, if not the planet will continue to be damaged by us all.

American report says that Shell only invest a little over 1% of their income on renewables, they said their headline of something like 12% is entirely incorrect.

Even 12% doesn’t seem a lot.

MaizieD Shells profits are earned in the countries it gets most of its oil and gas from, middle east, Africa, Asia , US and Uk, not necessarily low tax domains.

If you go to an auction, highest bidder gets the goods. How do you suggest energy companies selling their goods at auction control the price, beyond putting a reserve.

At the beginning of the century we had a long period when prices were very low and the energy companies cut back on investment . How do you suggest the price of commodities like oil (and wheat and trees and every other raw material we use) is controlled.

That was whaat the USSR used to do. It was not a world leader in either economic development, growth, the prosperity of its people or the quality of its goods.

How would you do better?

I don’t think for one second that our energy bills will go back to anything like they were pre Ukraine.
Irrespective of the cost coming out of the ground.

Shell gives more money to shareholders than it spends on renewables, etc., and offsets some profits against repair costs. The Tories are far less interested in the cost to ordinary people and Sunak is more to the right than his dishy Rishi image implies.

I think this is (partly) why Shell energy have been offering six months free broadband to its energy customers who switch ISPs. It’s a way of giving something back although they do then have your business for the remainder of the broadband contract so each get something out of the bargain. Their broadband

mere crumbs......

This is more likely Shell stepping into yet another of the necessary services.

Luckygirl3

Once energy ceased to be a public service and became a way for people to make profits, this was the inevitable result - and people go hungry and cold.

Shell is a private company, and it was only ever the energy providers who were once a public, nationalised service.

Visgir1

95 % of Shell 's profit is not in the UK.

Of course it isn't. It's in some nice low tax/ no tax jurisdiction.

95 % of Shell 's profit is not in the UK.

^ So customers bid each other up to get the scarce supply of energy they needed and the profits of those supplying it rocketted as well.^

That's an aspect of the market economy that always annoyed me. Profiteering pure and simple. Leading to inflation....

In my defence: it was 32 million on the news when I woke up!

Meanwhile Scotland is self sufficient in energy with more to spare/sell, This is due to offshore oil, gas, wind and wave power, together with onshore wind and hydro. However, since all energy is charged to the consumer based on how far they are from London, Scots pay more than any other part of the UK. Locally we have a huge windfarm, cunningly sited at the back of the hills so we do not see it but only a mile away. Is it fair that we are charged as if the power generated is charged for as if it had travelled down the grid to London and back up to us? Anyone with a basic knowledge of physics knows that this is not how it works.

Because not all domestic energy suppliers are energy producers and it would mean, for example, that Shell could halve the price their customers paid, while Octopus couldn't.

Thank you M0nica. I think this is (partly) why Shell energy have been offering six months free broadband to its energy customers who switch ISPs. It’s a way of giving something back although they do then have your business for the remainder of the broadband contract so each get something out of the bargain. Their broadband business is relatively small.

Viewed in isolation, it’s a saving worth £180 to the average customer paying c£30 a month for superfast fibre.

Shell are considering exiting the domestic energy and broadband market which could leave 1.4 million energy customers and about 500,000 broadband users look for new suppliers.

www.theguardian.com/business/2023/jan/26/shell-puts-2000-uk-jobs-at-risk-with-review-of-shell-energy-retail-division

Profits are so high because competition to buy limited suppies of oil and gas are so high. The huge profits are not made from us.

When Shell, Esso, BP actually get the gas/oil out of the ground. Some is sold on long term contracts, but a lot is then effectively sold by auction to the highest bidder.

For many years there was a glut of oil and gas. Supply exceeded demand so prices stayed low. In particular, Russia grew its energy industry, and built huge pipelines to supply, mainly Western Europe, with gas to fuel the move from polluting coal fired power stations to less polluting has-fired power stations.

Following COVID as countries world wide cranked up their industries and reactivated their economies demand began to exceed supply.

Then we had the ongoing Ukraine crisis. sanctions against Russia included sanctions against using Russian gas, so countries like Germany, heavily dependent on Russian gas has had to buy huge quantities on the open market, at the same time as the reduction in available Russian gas has reduced the amount available - then, of course Russia has been using gas as a weapon of economic war. So customers bid each other up to get the scarce supply of energy they needed and the profits of those supplying it rocketted as well. This explains why the energy companies have made such large profits.

There is a quite seperate question about what should happen to these huge windfall profits. I am enough of an economist to know that cross subsidising businesses in the same company is bad business pactice so using the profits from selling the raw product to final users is not a good idea. Because not all domestic energy suppliers are enrgy producers and it would mean, for example, that Shell could halve the price their customers paid, while Octopus couldn't.

However I do support windfall taxes on windfall gains and I think this is the best way to treat these huge profits.

Heard on r4 this morning that most of it has been paid to shareholders.
Much less into research. As expected really.

Once energy ceased to be a public service and became a way for people to make profits, this was the inevitable result - and people go hungry and cold.

Hopefully these profits will be invested in research and development of renewables, if not the planet will continue to be damaged by us all.

You might as well say 'I believe in the tooth fairy and father christmas...'

I think the profits will go on share buybacks, increased dividends to shareholders and increased executive pay.

Firstly I am not defending the energy companies. The prices are excessive, energy was at a premium price the minute Russia invaded Ukraine the wholesale prices are lowering so end user costs could/should come down.

Hopefully these profits will be invested in research and development of renewables, if not the planet will continue to be damaged by us all.

The answer is what it says on the tin - only put the other way round.
Profits are so high because we are paying so much for energy 🤬

“Prices” - now that’s another matter..

How many Tories MPs have shares or directorships in energy companies. I have FIT solar and the amount I get paid for the electricity I generate has not gone up like the units I buy!

Oh if only it was £32 Billion. I’m reading £68 Billion. 😡