13 ms·

Gas prices plummeting, energy bills soaring. The market will regulate itself. /s

by m000 4y ago

empedocles 4y ago
This is because companies buy long term contracts, which are still priced higher than the spot price on the, IMO reasonable, assumption that gas prices will rise again next year as the war continues (and Russia has more options to escalate e.g. cutting TurkStream).
- cpursley 4y ago
  Why would they cut (I assume you mean turn off, not blow up) Turkstream? Did you see the recent dealings between Russia and Turkey to expand those gas transit routes via that direction?
Am4TIfIsER0ppos 4y ago
The market is unable to function normally because of government interference. I expect there is a supplier and a contract somewhere that will give you the spot price. Furthermore the temperature has dropped so I expect demand has increased again so are you really sure you want that contract?
- sph 4y ago
  I am ambivalent on the idea of a completely free market. Because while I believe it would self-regulate, in a vacuum (or anarchic system), a free market paired with a government means interference, nepotism, laws that favour monopolies and kills competition. So when people like Liz Truss enter 10 Downing Street and claim they want to enact "free market policies", the result is just utter economic upheaval and chaos that hurts regular people further.
  - sidewndr46 4y ago
    Business people and political leaders in the West are almost universally in favor of the free market. Until it turns out that said free market might mean they get the short end of the stick. That is to say less tax revenue or less profit. When that happens they suddenly insist there must be some of government intervention, otherwise they are too big to fail.
    - benj111 4y ago
      Isn't that like saying people are in favour of free speech. Until someone starts inciting violence. It's still in favour of free speech, just with limits. The same applies to free markets. If they work as promised great. If not someone needs to step in and fix it.
      - sidewndr46 4y ago
        The problem of unbounded free speech is rectified by setting precedent that yelling "fire" in a crowded theater is obviously a criminal act. At least, it works this way in a common law nation like the US. This doesn't really cost anything, beyond criminal enforcement. The public good in this is obvious. The rectification of free markets in the US somehow involves massive transfers of wealth to private companies from the public sphere. Essentially just to make sure those companies don't suffer an adverse effects from their bad decisions. I'm not sure what the utility to the public is in this. Do we really need companies that only exist because of government handouts. Why didn't we bail out Enron in that case? What about WorldCom? Or was their mistake just having a Canadian as a CEO?
  - acdha 4y ago
    Monopolies and collusion happen without government regulation, too. I find it best to think of markets as something which are free in the same sense that a helicopter is not currently crashing into the ground.
    - pasquinelli 4y ago
      a free market is a mathematical model, which is a nice way of saying it's an imaginary thing.
    - deleted 4y ago
      [deleted]
  - zajio1am 4y ago
    Economic upheaval in UK is not because 'free market policies', but because of Liz Truss's irresponsible fiscal policy during inflation times, which shows her (and her chancellor's) basic macroeconomic incompetence.
    - sph 4y ago
      Sure, I wasn't trying to defend whatever Ms. Truss tried to do in her 40 days. It was terrible on all accounts.
kuratkull 4y ago
People seem to expect the free market to adapt immediately, for consumers immediate benefit. The market will regulate itself, but it may not happen in timeframes that people are comfortable with.
- m000 4y ago
  No, consumers just expect it to show consistent reaction times. A rumour is typically enough to warrant an overnight price hike in consumer prices. While for experiencing reductions, consumers have to wait for a few months for the market to "adapt". And in the end, it usually is the consumers that adapt to the increased prices, so companies don't see any good reason to reduce them.
  - MichaelZuo 4y ago
    That is how the market works? Look at any stock in any stock market that had a highly positive or negative rumour associated. You will see an immediate spike or dip in value and, a slow regression to the mean.
    - OkayPhysicist 4y ago
      You missed what they said: the problem is that consumer prices are not symmetric like that: prices spike, and then regress, but they never sharply dip.
      - vba616 4y ago
        What causes you to believe in the premise other than it being repeated a hundred times a day? I don't understand why people waste electrons making comments that cannot even be right or wrong without specific data and defined terms.
      - MichaelZuo 4y ago
        If you pay market rate, then by definition it's symmetric. If you pay a managed rate, subsidized rate, flat rate, etc., then it probably won't be. Which is the case for electricity and natural gas. Consumer goods that are usually priced at market rate, such as clothing, regularly see deep discounts.
woah 4y ago
These oil and gas futures are all publicly traded, as are most of the corporations working in the field. If it’s really so easy to make money because the market is rigged, guess what? You can get in on the action too.
- Workaccount2 4y ago
  Everybody complains that energy companies manipulate prices to enrich themselves. For some reason though none of them are happy that they can use their inside knowledge to get rich...
  - algoatecorn 4y ago
    Yep, I have friends who think the price at the pump is due to companies like Exxon and their "ability to price gouge". Like what? Yea dude Exxon is so powerful they let their stock freefall for 6 straight years post-2014
    - guerrilla 4y ago
      Your friend is right. They literally have record-breaking income right now[1]. It just headlined the FT two days ago. This is also happening with distributors/utilities. 1. https://www.ft.com/content/0d84255c-84ba-4462-b80a-8593352852e2 https://www.ft.com/content/0d84255c-84ba-4462-b80a-859335285...
      - algoatecorn 4y ago
        That doesn't mean they are right. This is a complex topic that I don't have time to write a thesis on at the moment. Some things to consider: cost cutting 2014-2019 enabled much higher profits when demand went through the roof, alternatives and substitutes, how is the price of OIL determined?, spot vs future, refinery capacity, how much of oil -> gasoline is vertically integrated, who oil producers sell to, who buys the oil, who distills it. So who's doing the price gouging? Oil producers? Distillers? Gas stations? Everyone? Are prices being gouged, or are there intricacies in this system which have compounding price effects on supply and demand hiccups?
kube-system 4y ago
This is because there are multiple markets for gas, depending on when and where you want the gas. The price for gas being delivered today is not the same as the price for gas in January. Because in the meantime, someone needs to store it.
- SilasX 4y ago
  Right — you might remember during the big freeze in Texas (February last year), a lot of people were ridiculed for using Griddy, whose very premise was “hey don’t pay those inflated utility prices, just pay the usually-cheaper spot price for your energy!” The utility price is higher because the result of longer-term price-locking contracts. The spot price can spike pretty hard, wiping out your gains, as those customers learned then. (Sorry, I don’t know the standard jargon for some of those concepts.)
collegeburner 4y ago
"price gouging is when futures contango" ok buddy. there's literally an energy provider here that will more or less give you spot. and guess what, a whole bunch of people got burned doing that. the issue is there's a glut right now, go look at the futures curve going into winter then get back to me.

Gas prices plummeting, energy bills soaring. The market will regulate itself. /s

by m000 4y ago

Gas prices plummeting, energy bills soaring. The market will regulate itself. /s

This is because companies buy long term contracts, which are still priced higher than the spot price on the, IMO reasonable, assumption that gas prices will rise again next year as the war continues (and Russia has more options to escalate e.g. cutting TurkStream).

cpursley 4y ago
Why would they cut (I assume you mean turn off, not blow up) Turkstream? Did you see the recent dealings between Russia and Turkey to expand those gas transit routes via that direction?

Am4TIfIsER0ppos 4y ago

The market is unable to function normally because of government interference. I expect there is a supplier and a contract somewhere that will give you the spot price. Furthermore the temperature has dropped so I expect demand has increased again so are you really sure you want that contract?

sph 4y ago
I am ambivalent on the idea of a completely free market. Because while I believe it would self-regulate, in a vacuum (or anarchic system), a free market paired with a government means interference, nepotism, laws that favour monopolies and kills competition. So when people like Liz Truss enter 10 Downing Street and claim they want to enact "free market policies", the result is just utter economic upheaval and chaos that hurts regular people further.
- sidewndr46 4y ago
  Business people and political leaders in the West are almost universally in favor of the free market. Until it turns out that said free market might mean they get the short end of the stick. That is to say less tax revenue or less profit. When that happens they suddenly insist there must be some of government intervention, otherwise they are too big to fail.
  - benj111 4y ago
    Isn't that like saying people are in favour of free speech. Until someone starts inciting violence. It's still in favour of free speech, just with limits. The same applies to free markets. If they work as promised great. If not someone needs to step in and fix it.
    - sidewndr46 4y ago
      The problem of unbounded free speech is rectified by setting precedent that yelling "fire" in a crowded theater is obviously a criminal act. At least, it works this way in a common law nation like the US. This doesn't really cost anything, beyond criminal enforcement. The public good in this is obvious. The rectification of free markets in the US somehow involves massive transfers of wealth to private companies from the public sphere. Essentially just to make sure those companies don't suffer an adverse effects from their bad decisions. I'm not sure what the utility to the public is in this. Do we really need companies that only exist because of government handouts. Why didn't we bail out Enron in that case? What about WorldCom? Or was their mistake just having a Canadian as a CEO?
- acdha 4y ago
  Monopolies and collusion happen without government regulation, too. I find it best to think of markets as something which are free in the same sense that a helicopter is not currently crashing into the ground.
  - pasquinelli 4y ago
    a free market is a mathematical model, which is a nice way of saying it's an imaginary thing.
  - deleted 4y ago
    [deleted]
- zajio1am 4y ago
  Economic upheaval in UK is not because 'free market policies', but because of Liz Truss's irresponsible fiscal policy during inflation times, which shows her (and her chancellor's) basic macroeconomic incompetence.
  - sph 4y ago
    Sure, I wasn't trying to defend whatever Ms. Truss tried to do in her 40 days. It was terrible on all accounts.

kuratkull 4y ago

People seem to expect the free market to adapt immediately, for consumers immediate benefit. The market will regulate itself, but it may not happen in timeframes that people are comfortable with.

m000 4y ago
No, consumers just expect it to show consistent reaction times. A rumour is typically enough to warrant an overnight price hike in consumer prices. While for experiencing reductions, consumers have to wait for a few months for the market to "adapt". And in the end, it usually is the consumers that adapt to the increased prices, so companies don't see any good reason to reduce them.
- MichaelZuo 4y ago
  That is how the market works? Look at any stock in any stock market that had a highly positive or negative rumour associated. You will see an immediate spike or dip in value and, a slow regression to the mean.
  - OkayPhysicist 4y ago
    You missed what they said: the problem is that consumer prices are not symmetric like that: prices spike, and then regress, but they never sharply dip.
    - vba616 4y ago
      What causes you to believe in the premise other than it being repeated a hundred times a day? I don't understand why people waste electrons making comments that cannot even be right or wrong without specific data and defined terms.
    - MichaelZuo 4y ago
      If you pay market rate, then by definition it's symmetric. If you pay a managed rate, subsidized rate, flat rate, etc., then it probably won't be. Which is the case for electricity and natural gas. Consumer goods that are usually priced at market rate, such as clothing, regularly see deep discounts.

woah 4y ago

These oil and gas futures are all publicly traded, as are most of the corporations working in the field. If it’s really so easy to make money because the market is rigged, guess what? You can get in on the action too.

Workaccount2 4y ago
Everybody complains that energy companies manipulate prices to enrich themselves. For some reason though none of them are happy that they can use their inside knowledge to get rich...
- algoatecorn 4y ago
  Yep, I have friends who think the price at the pump is due to companies like Exxon and their "ability to price gouge". Like what? Yea dude Exxon is so powerful they let their stock freefall for 6 straight years post-2014
  - guerrilla 4y ago
    Your friend is right. They literally have record-breaking income right now[1]. It just headlined the FT two days ago. This is also happening with distributors/utilities. 1. https://www.ft.com/content/0d84255c-84ba-4462-b80a-8593352852e2 https://www.ft.com/content/0d84255c-84ba-4462-b80a-859335285...
    - algoatecorn 4y ago
      That doesn't mean they are right. This is a complex topic that I don't have time to write a thesis on at the moment. Some things to consider: cost cutting 2014-2019 enabled much higher profits when demand went through the roof, alternatives and substitutes, how is the price of OIL determined?, spot vs future, refinery capacity, how much of oil -> gasoline is vertically integrated, who oil producers sell to, who buys the oil, who distills it. So who's doing the price gouging? Oil producers? Distillers? Gas stations? Everyone? Are prices being gouged, or are there intricacies in this system which have compounding price effects on supply and demand hiccups?

kube-system 4y ago

This is because there are multiple markets for gas, depending on when and where you want the gas. The price for gas being delivered today is not the same as the price for gas in January. Because in the meantime, someone needs to store it.

SilasX 4y ago
Right — you might remember during the big freeze in Texas (February last year), a lot of people were ridiculed for using Griddy, whose very premise was “hey don’t pay those inflated utility prices, just pay the usually-cheaper spot price for your energy!” The utility price is higher because the result of longer-term price-locking contracts. The spot price can spike pretty hard, wiping out your gains, as those customers learned then. (Sorry, I don’t know the standard jargon for some of those concepts.)

collegeburner 4y ago

"price gouging is when futures contango" ok buddy. there's literally an energy provider here that will more or less give you spot. and guess what, a whole bunch of people got burned doing that. the issue is there's a glut right now, go look at the futures curve going into winter then get back to me.