Gasoline prices continue downward, why not utilities?

Question

When the Gasoline prices first went up a few years ago, utilities costs skyrocketed and in some places is four times more than before the oil crunch. Why do utilities companies get away with keeping their prices at the sky-rocketed amount? Utilities sometimes cost more than rent now in America and some people just can't afford it. IT'S NOT RIGHT. What do you think?

Keep in mind that the oil price skyrockething is what affected the gasoline price surge and the utility price surge. So the base cause is the same.

Answer 1

Utilities have many other costs other than fuel, whether it is gasoline or natural gas (or even nuclear). A lot fo the cost of running a utility is the actual facilities to make the power. So when there is an increased demand (which I suspect was the case in most of the 90's, as the economy was growing rapidly) utilities would have been building power plants, as well as raising prices to limit the amount of consumption. So there isn't a perfect correlation between gas prices and utilities rates.
There are a couple of other factors affecting energy prices. First of all, most utilities, if not all, in the United States are heavily regulated, with an upper limit on what they can charge. The only way to increase rates is to convince the regulators that the utility cannot make a profit at the current prices. With higher energy prices, regulators were more willing to allow utilities to increase their rates, and I suspect that the utilities aren't rushing to drop rates when prices for fuel fall.
Finally, there is the matter of market manipulation. Companies such as Enron and Dynegy manipulated the energy markets in the early 2000's to increase prices and to reap excess profits from the positions they had taken in the futures markets. They did this by constraining supply, and then charging high prices for the remaining power, and also offering futures contracts to provide power to customers at inflated rates.
While some of the power trading companies, most notably Enron, were punished for this anti consumer behavior, others are still around, and they may still be manipulating the markets to some extent.
The final point is that prices in general tend to go up, so your parent's electric bill in 1990 would seem much lower than yours, but might be similar in inflation adjusted terms. If we assume an average rate of inflation at 3%, a bill that ran $30 in 2000 would be almost $35.82 now.
The truth is that all of these factors probably feed into the overall price increase in utility bills. There is rarely a single cause for any economic changes in a large, open system such as the U.S. economy.

Answer 2

Natural gas and electricity are government protected monopolies if the Democrats have their way by regulating oil companies gasoline will be just like your electric bill.

Also electric utlities since they are government created monopolies are guaranteed a profit regardless of how inefficiently they are operated. Plus they are allowed to pass on the fuel cost directly to the consumer without asking for a rate increase.

And finally, EPA regulations make if very expensive to build coal fired plants which produce electricity from cheap coal, and make it almost impossible to build a nuclear plant which is the cheapest way to produce electricity other than hydroelectric. So electric utilities use natural gas fired turbines to generate electricity which not only increases the cost of producing electricity but creates a greater demand for natural gas, driving the cost of natural gas up as well. But it doesn't matter because they can pass the cost of the natural gas directly on to the consumer so why should the utility company care.

Answer 3

Gasoline can be shipped from foreign countries. Natural gas is not so easy, as well as coal. I think that some generators prior to the Gasoline Hike were run with some oil product, but we switched. WHen Gasoline went up many switch to natural gas and can't or won't switch back to oil since it is still very expensive. THis increased the demand of Natural gas permanently. Coal prices is high because it takes a lot of diesel to ship. When Oil prices increase, many switch to train from trucks. Trains are more efficient and so its price was still much cheaper than trucking. This used up alot of trains that normally ship coal. Because we don't have enough trains, the rail operators jacked up the fees for shipping and Coal prices suffer. Because of the trains efficiency, its still cheaper to ship other cargo through rail though.

Answer 4

I think that as long as we have a President who's in bed with the Oil Executives, then the price of oil will continue going up and down to suit his popularity rating.
He doesn't have the same pull with the Utility Companies. Most of them are privately held and what we think has no effect on them. It's up to the Regulatory Commission to do something about the rising utility prices.
Plus the way that Bush and his buddies look at it, they can always afford the utilities and we can always burn our furniture to stay warm and open the fire hydrants to stay cool.
BUT, if we ain't driving, they ain't making no money. And they won't stand for that !!!

Answer 5

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Answer 6

Gas and utilities are really 2 different commodities -
Vehicle gas is NOT the same as home heat gas.
That would be like saying, the price of apples went down, why not bananas ?

Answer 7

they lowered the price of gasoline to get everyone to buy big SUV's. then when all the stock is depleted on the dealership lots, they will raise fuel back up to outrageous prices again.

think I'm wrong? ...go buy a gas guzzler and we will see who is mocking who then.