Comment: Unscrupulous energy utilities try to lock customers in at peak tariffs

The Daily Express today ran the headline " £100 OFF GAS BY CHRISTMAS" this predicted cut in gas bills comes after the wholesale cost of gas dropped 30 per cent from its summer peak. In a message of hope to households, TheEnergyShop.com said power giants should soon pass on these lower prices to their customers.

This headline came as no big surprise to me, since I had rather expected a falling off in gas prices after the summer peak in wholesale prices began to soften. While I have certain doubts over how swiftly utilities companies are likely to pass these savings on to customers since they are always quick to pass on costs but slow to pass back savings, I was surprised and concerned to receive a direct marketing call from British Gas around the time that wholesale prices started softening, aggressively pushing a pricing plan that would lock me into current gas rates at for the next year.

When I asked the sales person "what happens if gas prices go down?!" his only answer was "When did your gas bill last go down, this is an opportunity you should not miss - lock your prices in now". Despite my concern at the danger of locking in prices at peak level the sales person aggressively pushed this plan (the contract I discovered when I really pushed also including a £70 escape fee).

Call me cynical, but my concern is, that British Gas knew very well - far better we may reasonably presume than myself - that prices had likely peeked and were thus expecting downward pressure on rates, and were actively trying to lock customers in at peak level while they could. I never had an offer to lock prices before, but then prices were going up before. I happened to be on the whole informed thanks to the nature of my job, had I not been, I may very well have taken the guys point and locked myself in to a very disadvantageous deal and found myself unable to benefit from falling energy prices amidst a deepening recession.

This sort of shameless abuse of the inevitably often under informed customer seems to be relatively common practice across many service providers all of whom make extensive use of direct marketing campaigns. A consultation of other utility company web sites like EDF reveils that many are recommending fixed price plans.

I would be interesting to investigate further the direct marketing strategies of these firms in particular, and the consumer groups and demographics they are target ting.

News: Russia to buy Iceland!

Reuters just published that Iceland's central bank announced today Russia's agreement to provide the country with loans of 4 billion euros ($5.4 billion) - about half of Iceland's c.$11 billion GDP.

The central bank said the loans were for 3-4 years on terms that would be 30-50 points above Libor rates (very attractive loan terms).

The Icelandic Kroner has stabilised dramatically following this announcement and regained some of the value it has lost over recent days.

Figure 1: Icelandic currency









The big question is why? And what does this mean for the future? The loan terms etc. suggest Russia is not pricing risk for the well run but high risk Icelandic economy the same way the market is (see Figure 2). This however, is not a financial investment for Russia - the geopolitical implications for the world may be far more significant than are the economic implications (though for Iceland of course both economic and geopolitical implications are likely to be significant!).


Figure 2: Iceland - Credit Default Swaps (market price for risk of default)










Shall write on this as soon as I have a moment!

Analysis: The return of history and the beggining of the end for US empire?

Does Wall Street’s crack-up presages the beginning of the end for American power and global dominance? Empires of the past have seen their ideologies corrupt, their economies corrupt, their currencies devalue, finally loosing their military supremacy. The US increasingly is relying on its military. Cracks appearing here as well (Georgia etc.).

The US is short of metals, short of oil, increasingly short of water for agriculture, has debt beyond belief, a crippled and dysfunctional financial system, a population accustomed to living beyond there means, consuming things they do not need and cannot afford, as well as the most powerful military force in the world.

Russia has heaps of savings, no liquidity concerns given the cash government is sitting on, natural resources - oil, gas, minerals, vast agricultural land and resources etc. Russia is increasingly challenging the value of foreign investment, (macro economic problem according to Russia, other countries may follow) for less volatile internal investment and displaying increasingly assertive foreign policy. I have to say, long term, if I were a betting man, my money would not be on the USA.

There is increasing posturing for control and resources - new players, China, Russia, as well as non state players like islamist movements - this is leaving Americans feeling increasingly insecure. Unfortunately, the American reaction seems to be to fall back on military power as recent global events (Georgia etc.) seem to be pushing voters more and more to the "reassuring" figure of McCaine - veteran generation - but this is not going to help America's relationship with the world. If America wants to retain its grip on power it needs to display a little more benevolence. If I were America I would be doing everything I could right now to make sure I had some friends ahead of when the revolution comes, since it is obviously going to be America first with its back up against the wall - Scary thoughts.