Price cap bollocks

The “energy price cap” is forecast to rise by almost half as much again in the autumn. This article explains why.

A little investigation reveals this about the price cap:

Ofgem bases the price cap on how much it would cost a typical energy supplier to provide energy for an average home. It uses a raft of factors which impact upon energy bills in its calculations, as well as considering usage levels and market data across a given period. Wholesale gas and electricity costs for suppliers and the network costs they have to pay, such as infrastructure, are key factors. Ofgem also considers the operating costs and profit margin of suppliers.

However, the price of oil and gas bears no relation to the cost of their production, as their prices fluctuate even when there is no change in the input costs. Thus oil and gas are priced entirely according to what the market will bear. From this we can deduce that the that the bases on which Ofgem sets the price cap are entirely specious, except the last one.

As a thought experiment, what would happen if everyone stopped using oil and gas? We don’t have to think too hard, we can just look back to 2020 and see that the price went through the floor. So if everyone decided that the energy companies were charging too much and refused to buy oil or gas, it would become considerably cheaper.

Basically, the price cap is adjusted so that the energy suppliers, who buy on the spot market, where the price is set by speculators, can continue in business. The alternative, that the price is controlled so that the profits of the cartel are contained, is never considered. Hell, the cartel would rather have a windfall tax on their profits than that, which should tell you something.