Fuel prices – measly reductions just add to the confusion

The final two members of the Big Six energy suppliers, British Gas and EDF, have announced that they will reduce gas prices by… wait for it… a measly 5.1% and 5%, respectively, from next month.
The six have all reduced their prices in a narrow range (from 5% to 5.4%), with the first reductions on February 1 and the last ones coming in on March 31. Yet wholesale gas prices fell a whopping 57% last year.
The energy giants always say that they buy their gas or oil years ahead of selling it on to us – pre-buying – and they have to wait until they get onto their cheaper supplies before they can reduce costs.
You wonder that their expert traders can buy so badly and not notice the over-supply in the market and the slowing of the Chinese economy.

Measly reductions – lots of confusion

When wholesale prices fall it takes an age for consumers to feel the benefit. Yet, when wholesale prices go up, they immediately rise at the consumer end. Measly reductions just add to the confusion.
Take petrol prices. These too were tardy in falling (pre-buying, plus government taxes, were blamed for the fact the prices did not fall quickly or far enough).
But when the Brent crude oil price reached $36 a barrel 10 days ago – briefly – all the garages seemed able to put prices up at the pumps really quickly. Up 1p a litre to 102.9p.

All gas and

Now, the first of the energy companies to cut gas prices, E.on, (which had a little local difficulty with 120,000 older customers – see our earlier blog post), has this week increased the price on its latest fixed rate.
It launched a one year fix last month at 10.65p per kwh of electricity and 2.851p for gas. This week it has sent news to customers that its latest fix costs 13.398p for electricity and 3.789p for gas. The daily standing tariffs remain the same.
That is a 25% rise in the price per electricity unit.

Round and round and round it goes, and where it stops? Well, ask the shareholders.