This is an annual ritual. Every year, as the winter approaches in the northern hemisphere, energy prices go up. Be that gas or electricity and whichever is your energy company, the timing of the announcement always ads insult to injury. Indeed, as soon as the first chilly spell is in the horizon, the announcement that prices are going up by X percentage soon follows. The catalog of justifications for higher prices includes many reasons, with an old favorite being that wholesale prices over the last few months have gone up been somehow higher than expected. Well, that is sometimes hard to comprehend given that energy companies often hedge purchases to protect themselves from market volatility. Current favorites include anything related to greening technologies and environmental protection. One wishes that was true. Nevertheless, even if technological upgrade is mandatory, why consumers and not shareholders need to bear the lion's share of the costs, as it should be the case? Hence, shareholders' record profits will continue breaking records, so too your energy bills. This is a recipe for future economic and social disaster.
Yes, around the dinner table all these issues were discussed, but then someone asked what about the alleged higher prices of private security. And so, the discussion shifted to some other matters little discussed by the mainstream media and ordinary people:
- Exploration and production in dangerous places. As hydrocarbon demand increases, energy companies are forced to source supplies from ever more dangerous places. This is both true and a myth. Oil and gas exploration do takes place in ever more remote spots. However, downstream, this has always being the case. It is just a matter of finding the next promising oil field and comparatively speaking, at the beginning of the production cycle, the location is likely to be remote and perhaps dangerous spot.
- More private security is needed because production takes place in hot-spots. Private security wages have gone down over the last decade and increasingly local workers -at local prices- comprise the bulk of the security forces protecting operations, however imperfect these forces might be. The 1990s image of a bunch of very expensive ‘mercenaries' being hired to secure operations is long gone. You would be surprised to hear how many highly-skilled security contractors are actually struggling to find a half-decent job.
- The growing problem maritime piracy poses is making the transport of hydrocarbons hugely expensive. The problem has generated the need to hire maritime security experts, but never on the scale entertained by many. This is particularly the case when the issue is blown out of proportion and offered as a justification for higher extraction and production prices. In addition, governments are now deeply involved in maritime security operations off Somalia 's coast and other affected regions. Governments do not bill energy corporations for the enhanced security of international waters! Are we indirectly paying for the enhanced maritime security provided by state navies via our energy bills?
We also discussed the myths of green technologies being deployed to remote spots by energy giants to protect the local habitat. The security contractors protecting operations in remote spots can provide first-hand accounts on the issue. But that belongs to a future post.