Pre-occupied With The Buzz

I've been mulling over the fact that I haven't written on my blog much this week, after the flurry of content posted daily last week. Well, work has been a little mad but that shouldn't stop me right? So mad was work that I hadn't gone to yoga this week yet, but that shouldn't stop me from putting fingers to keyboard right? I did some time in the evenings finishing an excellent little book called The Winter Queen. Set in late 19th century Russia, it's about a detective who discovers that a seemingly straightforward suicide is more than what it seems, way more planned, devious, international and conspiratorially criminal. With all the fluid poetry that is that is Russian expression throw in. A nice, juicy one.

Anyway, the other pre-occupation I had this week was electricity prices. In lalaland, these are dictated by the Energy Market Authority (EMA) which apparently sells the rights to produce electricity to companies that produce the stuff and send it to homes. Honestly, very few people I know really understand how the bloody convoluted bidding process works. All we care about is that our gizmos work, the water gets hot and the lights come on when we flip the switch. Then we pay Singapore Power the bill. That's our monthly start and end. Here's my bugbear - for the longest time the EMA has been raising electricity tariff prices whenever oil prices go up. Now that the world is in a state of mild panic because of the civil unrest in Libya, oil prices have shot past the US$110 per barrel mark and this global problem has resulted in our electricity prices going up too. Up 6.1% to be precise. The price rise would be more acceptable if not for the fact that the folks announcing this hike also say in the same breath that most of our electrical production is done with natural gas. So two distinct commodities with two sets of prices but the cost of one is used to determine the cost to you and I of the electricity made from the other. That bothers me. In fact it bothers a lot of people but we don't seem to getting any answers from the gahmen, so maintain that the relationship is correct and apt. Say what? The powers that be then bring up the u-Save benefits that the gahmen is dishing out to combat inflation. The usual "we're saving you from calamity" ruse to get us thinking we're being looked after and there's nothing more to question. Hmm. I got a friend to send me some data off Bloomberg re oil and natural gas prices to analyse their correlation to each other plus their fluctuations in relation to jumps in our electricity tariffs. It's a little tricky because the data is multi-dimensional (different types of oil and gas, spot prices vs futures) and the EMA uses a 3-month average to determine future prices. So a little thinking is necessary.

Perhaps the simplest takeaway I can offer is that I am certain that natural gas prices and oil prices do not move in tandem.

It's as simple as that, and that blows the rational of linking electricity tariffs to oil prices quite substantially out of the water. There's even an MIT paper from their school of economics that acknowledges the decoupling. So let me figure some of this stuff out before I go on further, and send letters.