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Home » Money Blog » Recession Watch » How Energy Firms Are Profiteering at Our Expense
How Energy Firms Are Profiteering at Our Expense
By Nic Cicutti
Sep 4, 03:21 PM
I filled up my car with petrol on Saturday evening – probably not a smart move, given that it runs on diesel. A few minutes later it ground to a halt, was be towed away and had its tank drained, leaving us some £250 worse off.
Ironically, the experience gave me an unusual “panoramic” insight not just into the cost of diesel but of petrol too. At my service station, the price of “derv” is 124.4p a litre, while petrol is 114.2p.
Compared to a couple of months ago, when I was paying almost 135p a litre, that’s a sizeable drop – so why am I not very happy?
The main reason is that back in July, the cost of a barrel of oil was $147. Today, it has fallen by 27%, about $105. Experts suggest it may yet fall further, possibly below the $100-mark, and is likely to stay there.
Yet the cost of petrol and diesel has not fallen by anything like that percentage. My calculations suggest we are currently enjoying a drop of about 8% or 9% in the cost of petrol – nothing like the decline in world oil prices seen in that time.
The situation is made even worse for most consumers by the fact that petrol prices at the pumps are not the only thing affected by the cost of oil: so is the gas we use to heat and light our homes.
Since the 1990s, new power stations used both oil and gas for their supplies, which saw the price of gas become increasingly linked to the price of oil.
Until a few years ago, the UK was largely exempt from movements on the oil futures markets but in becoming a net importer of gas in 2004, the old link between gas and oil prices has strengthened.
Energy companies claim this offers them the advantage of knowing exactly how much they have to pay for gas. But as oil costs have risen, some experts claim that gas prices could be 40% lower if it wasn’t for the price link to oil.
The irony is that while oil prices have fallen by 27% in the past few weeks, energy companies are still intent on making us pay up to 40% more for their gas and electricity. None of them have said they will be cutting prices in the wake of the latest reduction in oil costs.
To be fair, the dollar price of a barrel of oil is not the only thing that influences petrol charges in the forecourt or energy bills in our homes, currency costs do too.
The fact that sterling has dropped about 7% of its value against the dollar means oil would be more expensive simply by virtue of such currency fluctuations.
Even so, according to the AA, the cost of petrol and diesel on our forecourts needs to drop another 8p a litre to match the real fall in the cost of oil.
So why are prices not falling faster? Well, the industry has been very keen to point out that it takes four to six weeks for changes in the price of oil to work their way through to the pump.
That’s as may be, but while the value of sterling has plummeted in the past few weeks, keeping prices up, this fall has been matched by an even faster reduction in oil prices, which should bring prices down. One ought to cancel the other – except that it hasn’t.
The reality is that what we are seeing is a classic case of companies – oil firms in this instance – who are using international market fluctuations as a means of sneakily boosting their profits.
We shouldn’t be too surprised at this fact: after all, mortgage lenders are doing exactly the same at this moment in time. They have used the credit crunch to increase charges for the rest of us.
But it still sticks in the throat. I mean, here we are, many families stuck in the most dire financial circumstances imaginable. Meanwhile, the response of banks, building societies and big oil companies is to make as much money out of us as they can.
Sick isn’t it?
User Comments
rachel 7 September 2008, 13:47
I totally agree with what A Carroll says,so why don’t us brits instead of moaning, do something about it, like i don’t know, i’m no expert in these fields but there must be something the whole country can do that hurts the governments pockets like the whole country going on strike or something as we all should be paid better wages to meet these extra prices,me & my husband are so fed up working our butts off just to line this governments pockets,oh not forgetting the ones on the dole & all the immegrants that we also have to support,come on brits don’t just moan do something about it.
Karamsad Patel 7 September 2008, 09:51
Greed is out of one’s own labour. LABOUR Government of “Teflon coated Tony” took us to war around the world and that is why we are paying to foot the bill of War in Billions of Pounds £ from tax payers. That is why we are confidently tricked into all kind of Tax. Ordinary Brit knows nothing about it. When I tell my colleagues at work that for every pound in your wage packet is actually worth only 30p in real term value of your wage. They laugh as idiots out of ignorance. Look at the VAT you pay. Council tax that is ever increasing, the rent increases specially if you live in council owned property. The car tax. The fuel tax and increases in fuel prices at the pumps to fill your four wheel drive. The none stop increases in our basic food (bread, milk eggs, potato and basic cut of meat) prices by our cartel of super markets. the parking charges by the Council. The Police catching you for minor traffic offences. The parking tickets tax is a nightmare for many motorists. The road license tax you pay. The gas , ELECTRIC AND FUEL COST- VAT AND TAX. The Telecom and Internet tax. Above all the TV licence and the new digital broad casting and Sky disk or Cable TV and cost for your choice of channels. The tax on your alcohol consumption. The cost of Leisure and sporting centres run by the Council – entry fees. The cinema cost. The baby boomer cost to manage and raise children to pay future tax. The cost of transporting the kids to schools. The school uniform cost you pay. the designer clothing cost for kids? Just Pay and PAY and PAY until you go to the grave when you pay death tax inheritance tax. The ever increasing Insurance cost for all types of insurance. The holiday cost. The money exchange rate. The financial market has fallen beyond one’s imaginations. PAY BRIT PAY AND STAY INDOORS. WAKE UP AND IT IS TIME TO STONE OUR MPs IN THE PARLIMENT SQUARE. They rip your pension and take you off your house when you grow old. It is just cost all around you to put you in the grave so that the NHS does not cost the LABOUR GOVT. more on you. WAKE UP BRIT FROM YOUR DREAM OF GREAT BRITAIN WE ARE JUST A TINY NATION compare to China and India.
THIS IS CALLED “meowing” OF Nationalistic BRITS BY LABOUR GOVERMENT.VOTE THEM OUT OF OFFICE may NOT CHANGE ANYTHING?? OR WOULD IT !!!! I DON’T THINK SO. IF ANY LABOUR MP OR SUPPORTER IIN HIS RIGHT MIND OF FRAME THAN ONE SHOULD RESPOND TO THIS blog. I WILL CHALLENGE HIS CONCIOUSNESS WITH MY labour of mind in right place.
Long live who?? Poor Brits in this cold weather with out heating. Let us go back to ice age when we had nothing but we were happy and will be happy.
laura jones 7 September 2008, 09:45
Also everyone seems to have forgotten we are at war(ILLEGALLY) in Afghanistan and Iraq- where do u think the money comes from- WE ARE PAYING FOR IT….
laura jones 7 September 2008, 09:43
The Uk has sold of most of our energy companies/banking systems and main shopping brands to GREDDY TEXAN OIL MERCHANTS AND BANKERS. They have control over what is going on – plus MR BROWN has given the BOE its own control- in other words it can do what it want without laws( Not that it abided by our laws- it has its own)
If you really want to know whats going on watch www.zeitgeistfilm.com..that explains everything or read the best democracy money can buy” by GREG PALAST or visit his site- This explains exactly who is running what and why UK is being shafetd by “THE MACHINE”
colin 7 September 2008, 09:37
with oil prices falling and the prices at the pumps staying high ,it is not only the oil companies profiteering . Tescos spend 50pound in store and get 5p off a litre is good but it appears at tesco dibden in hampshire they have increased their petrol pump price by a penny a litre to 1.14.9 whilst the nearest competitor is 111.9 per litre . do they think we wouldnt notice and disgraceful when oil prices are rising
Ian Barker 7 September 2008, 09:13
surprise, surprise oil,gas,electric and water companies are ripping us off. And amazingly the greed of companies goes unpunished by a government that has less backbone than a jelly.They are of course making an obsene amout of money out of it.
mike 7 September 2008, 08:20
And the government takes a percentage cut per gallon of fuel, not a fixed amount. So they have an interest in keeping prices high, but at the same time blame the oil companies. I think the government makes more profit out of oil than any other group.
Bob Cooper 7 September 2008, 07:42
The government has no comment to make because the oil companies are doing a good job on their behalf. Remember it is this government that wants to tax us out of our cars. Measures that they have tried include, above inflation duty hikes on fuel, tolls and congestion charging. They also wanted to prevent oil companies from reducing their prices once they had increased thereby raising more revenue.
So who is doing the ripping off??
Mr Griffis 7 September 2008, 01:01
Us Brits pay more for electrical goods than most American & Canadian states, we pay more for imported meat when our farmers are paid to not produce and now we are paying for Thatchers privatisation policies and foreign export policies.
The gap between rich and poor grows daily at a exponential rate linked to immigration policies which are unenforceable. We have foreign investors buying up our Football clubs and other business’s of British patriotic identity, our politicians have been found out to be corrupt time and time again across the board its time we broke the three party system and returned to the democratic country we were taught at school existed (did it ever I wonder).
We have imported “wage slaves” under-cutting people making them redundant, sweat shops, exploited immigration workers, home grown terrorist cells, sex trade slaves and criminal gangs operating in our own backyard.
Great Britain? Aye maybe it was once before the Romans invaded.
I vote for Albion how about you?
Paul 7 September 2008, 01:00
robert reed 6 September 2008, 21:06 said:
“the best way to beat them is for everyone go to one electric or gas company” – I agree or:……..
Nationalise so the profits go back to the people – all of the people not just the few who have enough already!
Geoff Thompson 6 September 2008, 22:38
The gist of this report I am afraid is not uncommon in media of all types. No matter how often it is reported and how obvious it is that the pubic are ripped off, it continues anyway. It seems that there is nobody listening and nobody reacting to the justified compaints of the public, which gives the impression that the British consumer is indeed treated as a cash cow. In Mainland Europe, prices seem to respond more quickly to changing oil prices, so the excuses given by the oil companies are not really justified.
Chris Samways 6 September 2008, 21:54
I recently read that Shell had announced half year profits of 4.75 Billion pounds, i was further angered to hear that BP had half year profits of 6 Billion pounds but this was due to exploration & not fuel sales, absolute rubbish Unfortunately the Govt are in such dire straights that they cannot or will not put a windfall tax on these organisations because they need the income. 12 months ago diesel was 10p a litre cheaper than petrol, becuase we have mostly moved to diesel cars due to better MPG & cheaper alternative petrol sales fell, so now we pay more for derv than petrol because they sell more of it. What ever we do we get ripped off.
Brian 6 September 2008, 21:49
T he government are made up of self seeking people who do not live in the real world, and have no experience of what life is like for ordinary people. They have their snouts in the trough and their hands in most of the privatised utilities, which by the way are not even owned by Britons. NATIONALISE ALL THE TRANSPORT AND UTILITIES AND YOU GET RID OF THE FAT CATS, YOU DONT HAVE TO PAY SHAREHOLDERS (MOSTLY FOREIGNERS) AND YOU DONT HAVE TO SHOW A PROFIT. lET ME GIVE AN EXAMPLE, BEFORE THE MINERS STRIKE COAL COST £13 A TON TO MINE, GIVE THAT FREE TO THE POWER STATIONS AND LET THE STEELWORKS HAVE FREE ELECTRICITY. FROM THAT SIMPLE ACTION YOU BECOME THE CHEAPEST STEEL PRODUCER IN THE WORLD, HAVE A THRIVING ECONOMY AND A MORE BALANCED SOCIETY, LESS UNEMPLOYMENT MORE SKILLS AND A BETTER PLACE TO LIVE. POLITICIANS DO WHAT IS POLITIC OR CONVENIENT AND THEY DO IT IN PUBLIC SO THAT MAKES THEM PUBLIC CONVENIENCES.
philip hewitt 6 September 2008, 21:34
fhe biggest con is british telecom with line rental charges. how do they get away with it .put a windfall tax on them at the same time (but the goverment still gets
its v a t how much is that raking in.
Douglas 6 September 2008, 21:24
for years the brittish government has been legaly theiving money out of the publics pockets so what is any different now just that they are getting faster at it
and now companies are doing the same the brittish public should know by now
that only the theives are protected by law.
And after centuries of this happening what chance do you expect of anything to drop in price
Douglas Hurrell 6 September 2008, 21:20
for years the brittish government has been legaly theiving money out of the publics pockets so what is any different now just that they are getting faster at it
and now companies are doing the same the brittish public should know by now
that only the theives are protected by law.
And after centuries of this happening what chance do you expect of anything to drop in price
mark 6 September 2008, 21:18
Rodolfo Fionda … I AGREE > free markets in the power industry does not work , shareholders benefit hugely , the ordinary person are being taking for a ride , it has too take a revolt of poll tax proportions for this government to wake up !
Malcolm 6 September 2008, 21:07
Have you never heard of the Bilderberg group. or the New World Order.
Do a google search for the Bilderberg group. Also Endgame by Alex Jones.
As for water companies, they are the only industry I know of whose raw material falls out of the sky for FREE!!.
robert reed 6 September 2008, 21:06
the best way to beat them is for everyone go to one electric or gas company . so the rest of the companies goes out of buisness
lou 6 September 2008, 21:04
does any one remember the film Teminater starring big arnie ? you should do,as our country is where the idea to make the film came from, the robots are now called the goverment who are trying to control and wipe us out and we are the missionaries of our country trying to fight back for survival what do you think ILL BE BACK
Eric Hulme 6 September 2008, 21:03
Eric HUlme,
It’s high time the threat of nationalisation was waved over the heads of the oil and power suppliers. The unions were never as greedy as these people so let’s give them another chance. Price cuts might then come before profits. This, by the way, from a dyed in the wool Tory.
RAY CHARLTON 6 September 2008, 20:42
Im sick and tired of the coments made on this site lets see the buldog of the british come forth and let us martch to parliament and show them once and for all that the british public have enough of being ripped off we just stay at home and put up with it my brother in new zealand told ,me they go to there town halls and councils to march against any price rises on fuel gas electricity telecom services let us see the bulldog rise against the politicions of all parties with there snout in the trough in anticapation .
jacqui 6 September 2008, 20:28
its time we went back in time alittle when the gas an deleric were goverment owned, and we had competiion at the garages, now every one is so greedy all for one and one for all, Rip off britain.
bev 6 September 2008, 20:22
prices near me have just risen when they should be falling. same as food prices reduce some. have special offers. great until you find that most other products have risen to cover t. total rip off.
darryl harber 6 September 2008, 19:09
switch to diesel cars they said its more economical we did then they promptly put up diesel higher than petrol rip off britain rip off labour
ANTONIO BENTO-FILIPE 6 September 2008, 19:05
thank goodness for baroness thatcher and greed is good. we are reaping what we sow. the feel good factor? if you want it go to your local doctors surgery.
robert mcgregor 6 September 2008, 18:10
Here we go again,the Great British moan and do squat syndrone.
Remember the poll tax introduction,then the riots and labour was intent of getting rid of it if voted in,well i got news for you, they got in, changed the name to council tax,and all was well.
The banks and bankers got rich in the good times,when they stop its called a CREDIT CRUNCH ,huh they made it.should be called GREEDY BANK SYNDRONE
BUT AS USUAL THE TAX PAYER BAILS EM.
I can`t smoke in my local,but the government will gladley sell me 20 for £5.50
i mean ban it totally or let us smoke.
when it was`nt illegal to be predjudist,i was`nt,but with all the imigration and politacle correctness brigade,i just don`t know.
Petrol ,gas, power don`t get me started.
Its the haves and the have nots ,always has been always will be.
But with Gordon brown at the helm(does he remind you of Brian the snail from magic roundabout, or is it just me)there will be plenty more to have a “GREAT BRITISH MOAN” about.
so come on you brits moan while the moanings good.
THE NEW WORKING PEOPLES PARTY 6 September 2008, 17:36
The high price gas/oil and electicity were planed, and all other price rises to follow (tax profit).bankers or should i say banker?
To fund pipe lines from ex russian republics will are rich in oil and gas,and may same war but they were stopped in there tracks.
All partys , STAND FOR tax, control greater police powers,no more freedoms to express one’s ideals.
NO ONE IN POWER CARES FOR THE PEOPLE NOR COUNTRY GREAT BRITAIN/UK/ENGLAND WHATS NEXT
Marjorie Bell 6 September 2008, 17:34
Of course it’s greed, it’s called the competitive market. Ahh, on second thoughts isn’t a “competitive market” supposed to bring in more competition, therefore bringing prices down? NO!! Not when the companies involved are operating a cartel to keep prices ever spiralling higher, to ensure that profits are ever spiralling higher. I do not think that the answer is Nationalisation, we would still have to import a large percentage of our oil and gas. I would drastically increase the tax on unearned income, and/or slap a significant windfall tax on the Companies involved. We should also close the tax loophole that allows “none domiciles” to bleed the British public dry. This would not hit the small investor as the pressure upon these Companies to produce ever increasing dividends comes from the “investment groups”, whose origins are largely obscure.
Oil Insider 6 September 2008, 16:59
We brits are suckers and don’t complain or act. So tough! The big companies always get it there way.
Surinder Sidhu 6 September 2008, 16:56
The only thing I can think is let these companies be nationlised and any leader or politicain says other wise should be hanged until dead.
These companies must be paying these politicain a back hander and that is reason they are speaking while the public is suffering in every way. The pertol, deisal, gas, electric and now the water companies. The Government is silent all the way otherwise the Government could have told every company that they can increase the price above the inflation. But the government is silent. Wonder what this prime minister is thinking.
ramon tine 6 September 2008, 16:11
You should get women to make love to you it is warmer and cheaper!
David Morris 6 September 2008, 16:11
I remember when Diesel used to be a lot cheaper than petrol as it was easier to produce. Along came unleaded, and guess what, it was more expensive than leaded petrol and diesel as it was more costly to produce. Now, diesel engines are more in demand than petrol engines as they are more economical. The result? Diesel is now the most expensive fuel on the forecourt. What has changed? Only the fuel companies having a bigger laugh at the British consumers expense.
Mike 6 September 2008, 15:41
If currency rates effect the cost of energy, and oil is priced in dollars, why (given the excellent dollar rate we have had over the last year or so) has fuel not been dirt cheap? The recent small price drop is simply to create a feelgood factor after the pain of repeated rises. We are getting acustomed to higher prices, so thats where the companies will keep thier prices, profiteering and ripping us off.
A Carroll 6 September 2008, 15:35
The only ones to blame is the LABOUR Government. Everything from food, clothes,Fuel,Council Tax,Parking,Speed cameras, are either directly or indirectly the governments caused problems. Immegration has got out of hand, we must be the only country in Europe that allows anyone in. Also with most of our laws/decisions now coming from Brussels why do we need so many MP. The average MP earns between £60 – £70K/year without the add ons of second houses expensises which we the TAX payer pays for, oh by the way how much Tax do you pay now compaired to when Labour took over, I am not talking about income tax, I am talking about all the stealth taxes this government has burdened us with. So if you think this government is trying to help the working person, think again they are out to line their own pockets. Because they know they are out next election and the incoming government will have a very big problem to sort, all because of Blair witch and Brown nose.
Ernie Wilson 6 September 2008, 15:28
Labour ripped us off with the abolition of the 10p Tax code. And the Conservatives ripped us off when they provatised the utilities 25 years ago. These companies should be brought back under public ownership with immediate effect, and at no cost to the taxpayer. As I write this, Politicians are enjoying 11 WEEKS holiday; during which, these utility hoods have announced 2 double digit price increases. These politicians should be in Westminster dealing with these utility hoods once and for all.
mary gribben 6 September 2008, 15:05
If the government and the energy companies want to help everyone with their fuel bills why not just have Solar Panels on all roofs, then we could all help both the enviorment and keep our heating bills down and once installed the maintainance cost would be very low
Rodolfo Fionda 6 September 2008, 15:04
There is only one way in which this whole thing can be sorted
Bring the Electric and Gas back under the control of the Goverment
Why should i have to take out a plan to protect what i pay for my energy, when my next door neighbour pays more for the same services
Every one should be paying the same price let it be Credit meter or direct monthly payments
The same cost should be the same for every one
We should not allow power to be owned by any company not of this nation
The solutions are simple, but the people in charge of us havent got the sence to work it out for them selfs.
gary 6 September 2008, 14:51
I an not against companies charging maybe 2-5% above inflation to cover growth costs,investment, wages etc but how can these companies get away with charging 25-40% above inflation? and especially taking the case of water companies who initially have put up costs to invest in cutting leaks etc but still get away with charging 4-5 times above inflation. There is one word that says it all with these companies and investors – GREED
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