Abstract painting of subject, generated by DALL-E 2

Who are the lying, snivelling bastards?

21 May 2010 - Bruno Prior

The energy companies? Our central bankers and Treasury representatives? Or both groups?

In America, prices fell in April, led by reductions in the cost of fuel and other energy. From The New York Times:

-"Consumer prices over all fell in April by 0.1 percent, the Labor Department said in its monthly report on Wednesday. The decline was the first since March 2009... The downturn was led by a decline in energy prices, especially for gasoline and natural gas, the report said. Energy prices fell by 1.4 percent in April, the department said."-

In the UK, prices rose in April, led by increases in the cost of fuel and other energy. From The Guardian (quoting Mervyn King, explaining why he was taking no action on inflation at nearly double his target rate of 2%):

-"First, the impact of higher oil prices, which on average in April were nearly 80% higher than at the beginning of 2009, pushing up on petrol price inflation; second, the restoration at the beginning of January of the standard rate of VAT to 17.5% and third the continuing effects on inflation of the sharp depreciation of sterling in 2007-8" -

The movement in the Pound/Dollar exchange rate between April 2009 and April 2010? The Pound had strengthened a little.

Pound/Dollar exchange rate Mar 09 - May 10  

The movement in the price of crude? Up 80% year on year in dollars.

Brent crude price Mar 09 - May 10  

The movement in the price of natural gas? Down 50% year on year in dollars.

Natural gas price Mar 09 - May 10

So Mervyn King is partly justified in pointing to an increase in the price of oil. And the oil suppliers are justified in raising their prices. But the net effect should be dampened in the UK not only by the strengthening pound year-on-year, but also by the fact that most of the cost of fuel is tax, not the cost of the oil. The average pump price was 95p/litre for petrol and 103p/litre for diesel in April 2009 and 120p/litre for petrol and 123p/litre for diesel in April 2010 (a 20-25% increase).

But the wholesale cost of fuels for heating and producing electricity has gone down massively. Either this should have been a countervailing force that required strong inflation in other areas to produce the sort of inflation we experienced (and the Americans didn't), or we are being ripped off by the energy suppliers. Probably a bit of both. But Mervyn, George and our VILE (Vertically-Integrated Large Energy) companies don't want to tell us that.

Whatever the excuse, if:

  • inflation is going up in the UK and down in the US, supposedly due to the effect of energy prices,

  • it is the same energy, at global prices, and

  • the change in the exchange rate year on year should have produced the opposite effect,then we Brits are being lied to and ripped off, as usual.


Copyright © 2023 Picking Losers