Free Gas is no Laughing Matter

[tikay]

So we all know, we have to conseve energy, there is only a finite supply. The Governments of the world lecture us patronisingly, "Joe Public is gonna have to get in line, Earth's resources won't last for ever you know", & the environmentalists lecture us too - as they should. Then I read this on Ceefax this evening.......

"....A glut of Natural Gas Supplies in Britain has seen prices collapse and Traders were having to pay to have it taken off their hands today.

Wholesale prices for immediate delivery turned negative after supplies surged in from the newly opened Langaled pipeline from Norway.

Britains gas storage capacity is 96% full, so firms need to offload supplies immediately....."
 
Hiow on earth can this be right?

[Rooky9]

My flat mates company lost over 100k by buying too much, then having to sell it back for free.... just a glitch with the market with the new pipe... the companies that supply business and individuals will be pleased - dont expect a reduction in your bill though!

[neeko]

sounds a doddle to build - why didnt they do it earlier.

http://www.timesonline.co.uk/article/0,,5-2381380.html

[thetank]

I have some old soda stream canisters they can have.

[RED-DOG]

I often have a surplus of gas and I distribute it freely

[bolt pp]

UNBELIEVABLE!!! I didn't know ceefax was still going!!!!

[Moskvich]

A serious answer for Tikay, as I gather from the forum that he likes these engineering-related things...

The UK gas market is a strange beast, and newspaper reports into gas prices, with their focus on household bills, rarely get to the real truth of the matter.

It is quite possible - especially at this time of year - for short-term gas prices to fall to almost nothing, or even on the odd occasion to go negative (ie you have to pay for someone else to take gas off your hands).

This is because of the limited flexibility in the gas pipeline system. (Did Snoopy not say the other day that he used to work for Transco? Maybe he can tell you even more fascinating facts about this...)

Anyway, in general the point is that you can't keep putting gas, from Norway or the North Sea or wherever, into the system if you and I and the rest of them out there aren't using roughly the same amount of gas for our cooking and heating and so on.

If the gas producers do keep trying to shove it in then eventually the pressure gets too high and the whole country blows up. Which is regarded as a bad thing.

Therefore, the companies that sell you your gas have an obligation to keep roughly balanced the amount of gas that they put into the system with the amount that they sell. If they fail to do this then they are effectively subjected to financial penalties for being out of balance.

One of the normal procedures for dealing with this would be to divert gas into storage (mostly big empty gas fields in the North Sea, which take in gas during the summer, when we don't need so much of it, and pump it back out in winter, when we need more than we can produce).

As we're at the very end of the summer, though, there's very little room in storage. It's also much more difficult to get gas quickly into storage when it's already nearly full, than when it's basically empty.

So, to get to the point - we've got an oversupply of gas in the country at the moment (because of the new supplies from Norway, also probably cos it's not as cold as maybe it should be at this time of year), and there're basically nowhere for it to go.

The price of gas for sale today, right now, is therefore basically zero. You literally can't give it away.

But that doesn't change the fact that the market for gas in December, or next year, or whenever, might still look potentially undersupplied. Those long-term prices (which tend to be linked to oil prices, which are also obviously high at the moment) will therefore be much higher - and it is of course those long-term prices that will determine your gas bills, not a temporary blip this week that is caused by the relative inflexibility of the pipeline system.

Fascinating stuff huh? Oh yes.

[RED-DOG]

Actually, yes!

[neeko]

If the gas producers do keep trying to shove it in then eventually the pressure gets too high and the whole country blows up. Which is regarded as a bad thing.

 

[tikay]

A serious answer for Tikay, as I gather from the forum that he likes these engineering-related things...

The UK gas market is a strange beast, and newspaper reports into gas prices, with their focus on household bills, rarely get to the real truth of the matter.

It is quite possible - especially at this time of year - for short-term gas prices to fall to almost nothing, or even on the odd occasion to go negative (ie you have to pay for someone else to take gas off your hands).

This is because of the limited flexibility in the gas pipeline system. (Did Snoopy not say the other day that he used to work for Transco? Maybe he can tell you even more fascinating facts about this...)

Anyway, in general the point is that you can't keep putting gas, from Norway or the North Sea or wherever, into the system if you and I and the rest of them out there aren't using roughly the same amount of gas for our cooking and heating and so on.

If the gas producers do keep trying to shove it in then eventually the pressure gets too high and the whole country blows up. Which is regarded as a bad thing.

Therefore, the companies that sell you your gas have an obligation to keep roughly balanced the amount of gas that they put into the system with the amount that they sell. If they fail to do this then they are effectively subjected to financial penalties for being out of balance.

One of the normal procedures for dealing with this would be to divert gas into storage (mostly big empty gas fields in the North Sea, which take in gas during the summer, when we don't need so much of it, and pump it back out in winter, when we need more than we can produce).

As we're at the very end of the summer, though, there's very little room in storage. It's also much more difficult to get gas quickly into storage when it's already nearly full, than when it's basically empty.

So, to get to the point - we've got an oversupply of gas in the country at the moment (because of the new supplies from Norway, also probably cos it's not as cold as maybe it should be at this time of year), and there're basically nowhere for it to go.

The price of gas for sale today, right now, is therefore basically zero. You literally can't give it away.

But that doesn't change the fact that the market for gas in December, or next year, or whenever, might still look potentially undersupplied. Those long-term prices (which tend to be linked to oil prices, which are also obviously high at the moment) will therefore be much higher - and it is of course those long-term prices that will determine your gas bills, not a temporary blip this week that is caused by the relative inflexibility of the pipeline system.

Fascinating stuff huh? Oh yes.

A lovely Post, & a fascinating one, too.

But my real point was that we have a finite amount of energy on earth - & we are giving it away. (To whom, & where do they keep it, one muses?).

Interestingly (yes, go away Kev...) you talk about the difficulty of storing gas - yes, it's a problem - but it's sortable. Did you know, for instance, that there is a facility in Wales where they STORE Electricity?.......Well thats nonsense of course, but in effect, thats what they do. They use spare generating capacity at night to pump water to the top of a hill (well, a great big shaft actually), & the water runs back down durung peak times, turning the turbines to generate more 'leccy. Repeat, rinse. Clever, eh?

But I'm still in shock that the Gas Industry cannot manage it's supplies and resources a little better. I guess that's because it's the remnants of a Nationalised Industry.

Meanwhile, we are told to cut our water usage, while 30% of Thames Water's product disappears via leakages in the system. The raw material that Thames Water uses is, well, water, which they collect, free of charge, from rainfall, via rivers underground reservoirs & aquafers. They then lose a third of it, & charge us an arm & a leg for mending their leaks.....Ah well, my Severn Trent shares are sitting cosily at £13+, so all is well within the water world.....

Now then, what else can I have a moan about?

[thetank]

One way train fares?

[tikay]

One way train fares?

Waste of money. Why buy a single. A return is twice the fun. Did I ever tell you about the atmospheric railway that Brunel built?

[thetank]

Coz you've lost the return 

[tikay]

Coz you've lost the return 

1) I lost my return ticket on my last three train journeys to London.

2) Place ticket on table so ticket inspector does not wake me up.

3) Wake up at terminus, wipe foam from chin & jump off train flummoxed & flustered.

Realise I've left ticket behind.

It's costing me a damn fortune.

[Moskvich]

But my real point was that we have a finite amount of energy on earth - & we are giving it away. (To whom, & where do they keep it, one muses?).

It's OK, tikay, it's OK... The gas doesn't actually go anywhere. Physically it stays in the system. It's just that all the companies that deal with gas on the wholesale market are trying to sell the gas that they currently own in the system, and which they can't sell to you because your boiler's turned off, to each other. PowerGen, for example, doesn't have the right to have all that gas sitting in a pipeline, waiting to do your cooking. That gas is getting in the way of tomorrow's supplies from Norway, and powerGen is effectively going to get fined for that. So the best thing PowerGen can do is try and sell the rights to that gas to someone else - say npower. But if npower has the same problem, then it isn't going to want to pay for the gas, because then it will get fined. So npower will only take the gas off PowerGen if PowerGen pays it to do so.

It's like any market, responding to supply and demand. But on a short-term basis, because of the restrictions of the infrastructure, prices can be exceptionally volatile. If you've got too much gas, you can't just press a button to stop gas coming out of the sea bed in Norway.

It doesn't mean there is any more gas or any less, or that the long-term value of the gas has changed - it just means that the value of gas for wholesale gas traders has changed, today. None of them wants it.

Of course, situations like this do eventually have an impact on wholesale prices for this winter and next year, and further down the line that has an impact on retail prices and your gas bill. Eventually...

In fact, you know the promotions from British Gas etc about fixing your gas price till 2010 and so on... Probably very poor value, just taking advantage of headlines about how much gas is going up now. Wholesale prices for next year and further out are almost certainly lower than they are for next month. So if you don't fix your price your bills will probably fall from this point on rather than rise.