Wednesday, 9 November 2022

Do we need a reality check? Well...

Perhaps readers would not mind if I said – Does humanity need a reality check? Oh dear, problems? What is reality anyway? I might be doing too much asking as it is but I have been thinking looking at the present situation of increasing prices, particularly in the power sector, how this situation has arisen. Hearing also about the enormous profits being made by the likes of Shell and others, EDF for instance. It makes you think ‘How is this right’? Well, first of all I suppose a market of whatever commodity is based on basic costs of acquiring it, then to manufacture or store followed by supplying it to the market. In the case of electricity it would be obtaining equipment, next generating it and maintaining the supply lines (cabling etc). For gas it is pumping it out of the ground and then into the supply piping system and also storage.

There are costs associated with these activities. Those costs will be increased by a percentage and charged to the user and let’s not forget tax levied or any other extras the government can think of. That percentage from what I remember can be up to 50% giving a net bruto of about 30%. I suppose they don’t give us those figures but percentages like those will allow for development of services and expansion. Great so far but something else happens as well, economics of the business. Meaning you could manage supply, increase or decrease availability. Exactly as the oil industry does on a daily basis. Oversupply reduces income, cutting supply increases the prices. Indeed, you begin to see how this works but it is mostly not to the benefit of the customer/user.

The other thing that is becoming clearer is the expectation of customers. Let’s be fair we all have become used to plentiful, cheap supply of almost anything you can think of. We have been lulled into a sense of false security. My personal mantra has always been ‘There is no such thing as a free lunch’. But you will be surprised how many people think there is! You only have to read history books about the Victorian age to know how different things can be. I have for long suspected that aristocrats and rich people would not mind those times coming back! Perhaps not so unhealthy as sewage running along the gutters but workers being subservient and totally dependent on the generosity of their ‘betters’.

On the news outlets recently was an interview with a youngish lady and asked ‘How do you manage your money’? And she replied ‘I have no idea, I don’t look at my monthly bank statement at all, but I know I am short, I don’t receive enough support’. I shudder because I know every day what is in my account and also use accounts software (MMEX) which is free. It pays to know where your money goes. Remember, the greenbacks have wings!

Overall, these two things, the economics of supply and demand, plus our expectations are making things difficult at this time. Probably because of the war in Eastern Europe and the increasing world population. Furthermore it is not going to get better any time soon, more people means more stresses, it is expected that the 8 billion world population will be reached this month of November 2022! Then also reduced availability because we are running out of things to dig out of the earth. Putting it all together I think the best thing I can say is – Look at how we consume commodities, how we recycle or not recycle, and how we use non-renewable resources. Good luck, will someone tell the overfed Americans?

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