RE: Energy price cap to be funded by government backed loans6 Sep 2022 10:16
Could be good news for SQZ, but terrible news for UK. You need to include businesses in any such price cap so £100bn will probably be double that. How we as a country can afford this after COVID hand-outs, never-ending structural deficits, huge debt with interest paid on that going up, is beyond me.
I'm dead against Windfall Taxes, but if you're going to apply it, you need to apply it to all producers, including renewables, as they're getting the marginal cost for all their produced electricity too! Slap them with the Supplementary Tax too which O&G producers pay on top of normal Corporate Tax! Remove all subsidies for renewable projects, which simply aren't needed anymore. Replace it with same WFT structure for O&G introduced (e.g. offset capex against WFT). Remove VAT from energy bills and green levies. Remove business rates for bricks and mortars high street shops, pubs and restaurants. Slap a supplementary VAT (digital sales tax) on online sales for the likes of Amazon to cover the tax take loss. The Government and Treasury could do some actual legwork and cut loop holes for big businesses, introduce rules to combat fake "profit shifting" by the likes of Apple, Amazon, Google etc. Focus energy price caps on the poor and those that need it (businesses that will collapse otherwise in these unusual FM type environment). Why someone in a mansion who could just leave their boiler on 24/7 is subject to a price cap is just sloppy and lazy. At least such measures will cut the cost of any government subsidized price cap to a more manageable level and not be final nail in the sterling coffin. It will also allow consumer energy prices to go back to normal quicker, after what could be a difficult 2-3yrs, rather than this max price cap becoming a min price cap once things settle down and more homegrown energy comes online (if producers are incentivised correctly and not demonised, otherwise you can kiss goodbye to more production).
This can't be solved overnight and may take longer than 2-3yrs. Since the oil price crash of 2014, we've had huge structural deficiencies in O&G capex globally, as the crash which would have corrected itself quicker, was followed by demonization, "ESG", lack of investment in the industry etc. This is not just a Ukraine War story, although obviously has massively exasperated the issue in short-term. Energy prices in Europe will obviously decline if there is a resolution of Ukraine war, but if you think energy prices are going back to "the norm" we became used to over last decade, you could be bitterly disappointed. The fact oil is still at $90+ in the face of a tremendously strong dollar and recession, should tell you something.
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