Hello Everybody and Happy Monday!
Wow, its week 5 already! That means its almost time for our biggest event of the year with Wood Mackenzie at their Edinburgh offices (27th of February), you don't want to miss this one! Keep an eye on our Facebook page: Edinburgh University Energy Society as details will be released soon. Today's stories:
1. OFGEM: CAPPING ENERGY PRICES AND FINING OVO
2. CORONAVIRUS AND LIBYA: IT'S ALL ABOUT OIL
OFGEM: CAPPING ENERGY PRICES AND FINING OVO
What happened? Ofgem (the British government Office of Gas and Electricity Markets) has said that the maximum that UK households will pay for their gas and electricity is going to fall. Meanwhile, OVO, UK’s second-largest energy supplier, was fined £8.9m for issuing consumers with inaccurate or incomplete information.
What does this mean? Ofgem announced that from April, the average dual- fuel energy bill will fall by £17. A similar cut will be seen for homes that have a prepay meter. The cap was lowered to ensure a fair price for energy consumers as gas prices fall on the markets. It is set to last for up to six months. On average, bill payers will be saving between £75 and £100 per year on their bills. Continuing with consumer protection, Ofgem found that OVO had sent inaccurate annual statements to over half a million customers between July 2015 and February 2018. They also incorrectly charged some customers after prices were capped. The problems were blamed on the company’s IT system and a fine of £8.9m was issued. Why should I care? As a likely energy consumer, Ofgem work affects you directly. Energy bills are set to fall for about 15m UK households as a result of the cap lowering. Find out if the new price cap affects you via this link: ow.ly/p9vK50yghPx.
CORONAVIRUS AND LIBYA: IT'S ALL ABOUT OIL
What happened? In the previous newsletter, we discussed how oil prices have been driven down by a decrease in demand due to the coronavirus whilst supply has been curtailed by a crisis in Libya, here is an update. On February 4th, OPEC and OPEC+ allied members, who together account for 90% of the world’s oil supply, met to discuss an emergency reduction in oil production. Meanwhile, the blockade in Libya continues.
What does this mean? On the 4th of February 2020, the price of oil had already decreased by almost 20% as a result of the coronavirus outbreak. OPEC+ technical experts met in Vienna to assess the impact of the crisis on oil demand. On the 6th of February, they recommended that OPEC enforce further supply cuts and curb production by a further 600,000 barrels a day for the first half of 2020. The idea behind reducing production is that a lessened supply of oil would balance out the lower demand to help stabilize oil prices. There were diplomatic tensions between Saudi Arabia and Russia as the latter is less vulnerable to lower oil prices. This is not uncommon between the two countries and over the past years, they have often quarrelled over the issue of oil production cuts. The task facing OPEC+ is further complicated by the uncertainty over the situation in Libya where the Libyan National Army has been blockading oil exports. If Libya restarts exporting crude, matters will be more difficult as supply would be increased, which is exactly what oil-exporting countries are trying to prevent. Why should I care? The uncertainty around oil prices and the recent fall has affected big companies such as UK energy giant BP that now has added pressure following their reporting of a 25% reduction in their profits during the last quarter of 2019. Lower oil prices are also likely to affect other major oil and gas companies globally.
10th February, 2020