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It's not a market failure. Markets are not supposed to keep a steady profit margin regardless of demand. Production cannot be scaled up and down infinitely and

by rconti 4y ago

It's not a market failure. Markets are not supposed to keep a steady profit margin regardless of demand. Production cannot be scaled up and down infinitely and immediately. The price is a market signal. The fact that production cannot be immediately scaled to serve the customer demand and bring prices (and therefore profits) back down to a "normal" level is not a market failure either; it's simply a physical reality.

Ekaros 4y ago
The true market failure is on demand side. Demand is what drives the price not the supply. With low enough demand the price just doesn't go very high.
- vorpalhex 4y ago
  Sure, you are free to be the first one to freeze to death this winter or melt during the summer. I don't think anyone is meaningfully wasting electricity in Europe currently. Demand can't go to zero. Supply dropped significantly.
  - ZeroGravitas 4y ago
    Ekaros is correct. Lots of people pay a fixed cost for their electricity whether it is generated at peak time with lots of gas or in the middle of the night with wind and nuclear. We don't currently do a good job of responding to price signals. We have some plans to expand this, which are being rushed into service after being neglected for a long time. https://www.bbc.co.uk/news/business-61949246 https://www.bbc.co.uk/news/business-61949246 And even that has to lie about "it not being about rationing" because price signals are so foreign to the consumer energy market.
tenpies 4y ago
The problem is the huge role government has had in this, which means regular market mechanisms won't work for a while. 1. The Western governments have spent a decade demonizing fossil and nuclear energy. For that whole time, big funds have divested, and investors punished. No major fund is going to touch this sector, especially not if the intent is a capital project. Nuclear is just seeing a turnaround as some governments regain their rationality (e.g. Japan), but others seem to be utterly hopeless (Canada, Germany). 2. The above means that schools stopped offering the programs necessary to train the workers for the industry. There is an entire generational gap now in oil and gas trades, from the roughneck to the engineers. 3. The government's incompetence has caused rampant inflation which, affects these industries too. Suddenly you have to deal with the labour shortage, there being no raw inputs (the year supply of anything from pipe to mud was sold out in most markets by Q1 of '22), and you have no idea what great ideas government will pass by next quarter so you have to price high to build a buffer. All of this leads to huge uncertainty. The worst part in my eyes, is that we're only really seeing the beginning of this. Governments are still on their ESG-above-reality stance. Approval from their UN SDG and WEF cronies is still more important than their constituents well-being. I honestly feel for the Europeans that saw this coming and voted accordingly - but more for the Africans and Asians who will be bid out by Europe and be faced with starvation of freezing. They had no say in this and they will pay the steepest price for Europe's ESG hubris.

by rconti 4y ago

Ekaros 4y ago

The true market failure is on demand side. Demand is what drives the price not the supply. With low enough demand the price just doesn't go very high.

vorpalhex 4y ago
Sure, you are free to be the first one to freeze to death this winter or melt during the summer. I don't think anyone is meaningfully wasting electricity in Europe currently. Demand can't go to zero. Supply dropped significantly.
- ZeroGravitas 4y ago
  Ekaros is correct. Lots of people pay a fixed cost for their electricity whether it is generated at peak time with lots of gas or in the middle of the night with wind and nuclear. We don't currently do a good job of responding to price signals. We have some plans to expand this, which are being rushed into service after being neglected for a long time. https://www.bbc.co.uk/news/business-61949246 https://www.bbc.co.uk/news/business-61949246 And even that has to lie about "it not being about rationing" because price signals are so foreign to the consumer energy market.

tenpies 4y ago

The problem is the huge role government has had in this, which means regular market mechanisms won't work for a while. 1. The Western governments have spent a decade demonizing fossil and nuclear energy. For that whole time, big funds have divested, and investors punished. No major fund is going to touch this sector, especially not if the intent is a capital project. Nuclear is just seeing a turnaround as some governments regain their rationality (e.g. Japan), but others seem to be utterly hopeless (Canada, Germany). 2. The above means that schools stopped offering the programs necessary to train the workers for the industry. There is an entire generational gap now in oil and gas trades, from the roughneck to the engineers. 3. The government's incompetence has caused rampant inflation which, affects these industries too. Suddenly you have to deal with the labour shortage, there being no raw inputs (the year supply of anything from pipe to mud was sold out in most markets by Q1 of '22), and you have no idea what great ideas government will pass by next quarter so you have to price high to build a buffer. All of this leads to huge uncertainty. The worst part in my eyes, is that we're only really seeing the beginning of this. Governments are still on their ESG-above-reality stance. Approval from their UN SDG and WEF cronies is still more important than their constituents well-being. I honestly feel for the Europeans that saw this coming and voted accordingly - but more for the Africans and Asians who will be bid out by Europe and be faced with starvation of freezing. They had no say in this and they will pay the steepest price for Europe's ESG hubris.