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Pricer’s Points: The idea of an energy price cap could damage the energy markets | Lord Redesdale

The recent hikes in energy prices, has led to the government contemplating price caps, because as they have said, the energy markets are not working. This idea was widely derided when Ed Miliband announced the Labour policy of a price freeze out of the blue in 2015. Even though Labour where not likely to be the next government, the idea that this could happen wiped billions off the share price of energy companies. The present discussion is around unfair energy price tariffs and how the government might have to intervene as switching is not working. The stupidity of this approach is the belief that cheap energy prices are in the behest of politicians. Following this line of thought is illogical because by the very nature of a competitive market there must already be winners and losers otherwise why switch. Cameron also played politics introducing a limited number of tariffs which in effect sets prices and kills competition. This policy was dropped as it was seen as a failure.

The reality is that prices rise when fuel costs rise, who knew? We import our fuel from abroad and pay for it in dollars, the fall in sterling following the Brexit vote has made fuel over 10% more expensive and the energy companies are passing that cost onto consumers.

So why the planned intervention? Energy prices have always been counted as a political football and for many decades the government through coal and gas were able to control the cost of fuel.

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The idea of an energy price cap could damage the energy markets | Lord Redesdale | Pulse | LinkedIn.