For Consumers and Producers Electricity and Utility Costs Are Still Soaring

September 14, 2022

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10:01 pm

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49 comments

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Economics

CPI and PPI Data from BLS, chart by Mish

Year-Over-Year Price Changes

For consumers, the price of electricity is up 15.8 percent from a year ago. That is the largest 12-month increase since August 1981.
For producers, the cost of electrical power is ups 12.2 percent from a year ago.

Month-Over-Month Price Changes

CPI: In the last three months ending in August, the cost of electricity has gone up 1.7%, 1.6%, and 1.5%.
PPI: In the last three months ending in August, the cost of electricity was -0.2%, 2.6%, and 1.0%.

CPI Major Energy Components

CPI Energy Component Changes

Energy Aggregate: -5.0%
Gasoline: -10.6%
Natural Gas: 3.5%
Electricity: 1.5%

CPI Energy Weights

Energy: 8.782
Gasoline 4.824
Electricity 2.658
Natural Gas 0.954
Fuel Oil: 0.239

Although gasoline fell 10.6% in August, the overall energy drop was muted due to rising electrical and natural gas costs.

Utilities have been increasing prices regularly, mostly due to the rising price of natural gas.

September Natural Gas

Natural gas futures courtesy of Trading Economics, annotations by Mish

If the month were to end right here, the average price of natural gas seems roughly in line with the average price in August.

September Unleaded Gasoline

*Gasoline futures courtesy of Trading Economics, annotations by Mish*

Energy CPI Look Ahead for September

AAA has the unleaded price of gas at $3.70. A week ago it was $3.77 and a month ago $3.96.

Unfortunately, I do not have the price at the start of the month. I am guessing prices are down for the month an average of 5 percent. A bounce to the end of the month can easily take all of that away.

It’s a bit too early to project, but as with August, the CPI will come down to rent, owners’ equivalent rent (OER), and food once again.

If the price of gasoline spikes for any reason, the CPI might be very ugly in September.

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49 Comments

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Webej

1 year ago

Webej

1 year ago

In Europe they parade people on TV every day telling us how their business can’t survive with current gas prices, but they would love to be able to finance electrical ovens, or whatever.

Of course they are never contradicted, none of these fools seem to realize their bills will not go down if everybody starts heating with electricity produced on the margin with gas, and nobody seems to realize that heat produced from electricity is always going to require far more energy.

Webej

1 year ago

Reply to Webej

link to facebook.com

TexasTim65

1 year ago

I suspect a lot of people still haven’t seen the price shock yet because their local utility can only raise rates once a year (with government approval) and because many of those utilities probably also have locked in fuel rates a year at a time so they can deliver electricity at the negotiated rates.

However as more and more fuel contracts expire and rates can be negotiated, expect to see the costs rise throughout the system. So it will be a rolling wave of increases rather than everyone’s bill jumping all at once like gas prices do.

Salmo Trutta

1 year ago

There is “asymmetric price transmission”, where if the supply of inelastic prices is suppressed by the administered prices, then the price of other goods and services demanded, rises.

Lisa_Hooker

1 year ago

Reply to Salmo Trutta

Of course, that would make the other goods and services elastic, even if they weren’t, wouldn’t it.

8dots

1 year ago

Blame the Fed, pray for God five times a day. JP sucked liquidity, raised interest rates and provided plenty collateral to the o/n market

to prevent a 2008 “event”. Predictions are dire. In order to plunge, first SPX weekly have to cross Sept 6 low, a trigger, then

May 16 low, a trigger, then June 27 low, another trigger, then June 13 low, then……an uptrend channel : Feb 2018 high to Feb 2020 high // parallel from Feb 5 2018

low that gave support to June 2022 low.

In order to move higher, first SPX have to close > June 27 high, a trigger high, then May 16 high, then May 31 high, then Aug 15 high, then ==> SPX might be in a four/ five months trading range, to get the dire traders cash…for fun and entertainment only in the blue zone casino.

8dots

1 year ago

$COFFEE weekly : up in the last 3Y from $1 in 2019 to $2.30 in 2022. MCD raised coffee prices. In my area medium coffee :

MCD : $1.37. DD : $2.75. SBUX : $3.13. In the morning rush hours lines are long. Demand for the morning jolts is high. Demand for new houses is weak.

Lisa_Hooker

1 year ago

Reply to 8dots

So what does that do for – new coffee houses?

Salmo Trutta

1 year ago

Inflation is broad based. Demand is outstripping supply. The surge in the money stock is unparalleled in U.S. history. AD is incalculable. Not only is the roc in money flows historic, but at the same time, so is money demand. So, stagflation will be with us for a long time.

Larry Summers doesn’t know what secular stagnation is. It is not an imbalance between savings and investments. The increase in the supply of loanable funds was driven by the FED – in response to the impoundment of savings in the payment’s system. I.e., an increase in bank-held savings shrinks gDp. It’s stock vs. flow (as predicted by Dr. Leland J. Pritchard, Ph.D. Economics Chicago 1933). See: “Should Commercial banks accept
savings deposits?” Conference on Savings and Residential Financing 1961
Proceedings, United States Savings and loan league, Chicago, 1961, 42, 43.

Casual_Observer2020

1 year ago

Reply to Salmo Trutta

Read the link I posted below. There is big money driving up the price of everything due to deregulation that occurred in 2017. This is quite similar to the deregulation of derivatives in 2000 that caused the housing bubble and crash.

Salmo Trutta

1 year ago

Reply to Casual_Observer2020

I know that commodities go thru overpricing and underpricing. But how does a swap-guarantee only create higher prices?

Casual_Observer2020

1 year ago

The speculators are driving up prices via derivatives. They have been since regulation was undone in 2017.

https://www.salon.com/2022/06/16/how-wall-street-speculation-is-driving-inflation–and-how-the-democrats-can-fix-it_partner/

Casual_Observer2020

1 year ago

Reply to Casual_Observer2020

link to tyt.com

Lisa_Hooker

1 year ago

Reply to Casual_Observer2020

Speculators have been driving up prices since the CBOT was established in 1848.

StukiMoi

1 year ago

Reply to Casual_Observer2020

The one and only thing which “drives up” prices to any degree, is printing money.

Only unusually slow children falls for every new scare story that rank dimwits tell them about the latest weird bogeymen in cabals being “mean” and doing “baaad” things to “the market.”

This is the USA. 50 years past the last, even tentative, constraint of completely unfettered debasement theft being abolished. There is no market. Hasn’t been for at least half a century. It’s a theft racket. And nothing but a theft racket. That is what money printing is. Just theft and nothing but. Only dumb people don’t immediately recognise that.

JRM

1 year ago

I’m going to continue put out the facts, DIESEL is the primary fuel that moves products around the USA, not gasoline!!!!

The vast majority of Gasoline prices are above the TRIPLE AAA, bragging of prices!!!!

Lisa_Hooker

1 year ago

Reply to JRM

Nah. The primary fuel is ATF Jet-A or Jet-A1.

You can’t get strawberries in February with DIESEL

Or iStuff for that matter.

StukiMoi

1 year ago

Reply to Lisa_Hooker

It takes diesel to get Jet-A to where it’s useful. Not the other way around.

It’s the same story for near all fuels: The heavier grades; bunker fuel and diesel; does the heavy lifting. The lighter stuff is luxury.

Christoball

1 year ago

Split Wood and Atoms!!!!!

Jojo

1 year ago

Reply to Christoball

Fuse atoms is better.

Christoball

1 year ago

Reply to Jojo

I wish

Jack

1 year ago

Reply to Jojo

Fusion would be be better but even when the solution is cracked, initially it will be expensive to build and only done on a small scale.

Will take years more to scale up the technology and simplify the design so it becomes more economical to built and operate.

However, long term this must be the solution.

grazzt

1 year ago

Reply to Jack

Maybe if they find a better conversion of energy. I always thought it was stupid to boil water with radioactive material to generate steam produced energy. Seems to make even less sense to use basically the same procedure of steam energy with man-made sun at a temperature of 100M deg. F.

Jojo

1 year ago

Reply to Jack

China Approves World’s Largest Pulsed-Power Plant; Sets Eye On Achieving Nuclear Fusion Energy In Six Years – Top Scientist

By Ashish Dangwal

September 16, 2022

China’s ambitions to generate near-limitless clean power through nuclear fusion energy appear to be inching closer to reality, with the country’s leading nuclear scientist predicting that the nation will achieve nuclear fusion energy within the next six years.

On September 9, Professor Peng Xianjue of the Chinese Academy of Engineering Physics announced that the Chinese government had approved the construction of the world’s largest pulsed-power plant in Chengdu, Sichuan province.

He also told a gathering hosted by Beijing-based think tank Techxcope that the country intends to create nuclear fusion energy by 2028.

“Fusion ignition is the jewel in the crown of science and technology in today’s world,” Professor Xianjue stated, according to the South China Morning Post.

“Being the world’s first to achieve energy-scale fusion energy release will lay the most important milestone in the road to fusion energy for human beings,” he added.

Nuclear fusion has been dubbed the “holy grail” of energy sources because it provides endless energy by mimicking the natural events that occur inside the Sun, where massive energy is released when hydrogen atoms collide to form helium atoms.

….

link to eurasiantimes.com

Lisa_Hooker

1 year ago

Reply to Jojo

I vote for fusing wood.

xbizo

1 year ago

Two and a half years of stimulus and cheap, cheap, super cheap debt. It will take two and half years to unwind all of the misallocations. Fed Funds rate will go to 5.5%, maybe 6.5% then cut to about 3.0%. That would be about ‘normal’ pricing imo.

Lisa_Hooker

1 year ago

Reply to xbizo

2 1/2 years?

This has been going on since the idiots Bernanke, Paulson and Geithner started playing around with the FRB and the financial system in 2007-8.

Actually it’s been going on since Greenspan cut interest to 1% in 2003 after the dot.com collapse and he initiated the major housing bubble of the 2000s’.

xbizo

1 year ago

Reply to Lisa_Hooker

You are correct, of course. If interest rates don’t stabilize at a fair rate, then we will go into another bubble. If equity is getting 10%-15% returns, 10-year debt has to return 5% at least.

I think the big problem is the amount of debt, which is long-run deflationary, along with near-term demographics. When the U.S. government gets a ‘pass’ on its credit rating, it drives interest rates below rational values.

The QE, QT stuff is a different animal.

conservativeprof

1 year ago

The cost of Democrat energy policies has only just begun. Democrat energy policies reduce supply of natural gas. Entire Democrat states (NYS) ban natural gas development. If only these states were denied natural gas. The Democrat dream of a RE grid has no price tag. The costs and reliability are unknown of a massive buildup (covering the equivalent geographic of 5 states) of wind/solar plants, hundreds of thousands of miles of transmission capacity, unknown costs and reliability of industrial batteries, and costly upgrades of local grids. The environmental impact of the mineral development and land usage is also unknown. Despite Democrat plans to explode USA energy costs for their Utopian decarbonization goal, the developing world (with most of the growth in CO2 emissions) will not follow along. The developing world especially China and India plan 600+ new coal fired plants in the coming decade and full maintenance of existing coal fire plants.

PapaDave

1 year ago

Reply to conservativeprof

Your politics are blinding you. Energy prices will stay high no matter who is in power.

Rather than whining about it, you should be taking advantage of the investment opportunity.

Lisa_Hooker

1 year ago

Reply to PapaDave

Exactly. Buy into coal-fired generating plants in India and China, and coal miners, and coal-burning equipment makers. Good for the next decade. .

billybobjr

1 year ago

Reply to PapaDave

“Your politics are blinding you”. Pot , kettle black . Step in front of mirror . Blind guides .

Zardoz

1 year ago

Reply to PapaDave

Can’t talk sense to these folks. Politics is religion to them. They believe things on faith, and have no interest in reality.

Lisa_Hooker

1 year ago

Reply to Zardoz

Reality is for people that can’t handle their drugs.

Faith is believing your dealer won’t turn you in for a lighter sentence.

Politics is a fusion of religion and major league sports.

JackWebb

1 year ago

Reply to Zardoz

As soon as you talk about your global warming religion, I’ll stop laughing at you.

PapaDave

1 year ago

Reply to JackWebb

Whether you call it science or religion, matters not.

The facts are clear. The world is warming, the ice is melting, the oceans are rising, and climate extremes are costing us all.

Which is why the world is in an energy transition that will last for decades.

As I usually say; I can’t stop what is happening. But I can recognize what is happening. That recognition is what allows me to understand the investment opportunities that are out there.

Casual_Observer2020

1 year ago

Reply to conservativeprof

Sure. Keep thinking its the policy and not the market deregulation. This thing is going spiral quickly once large hedge funds get on the wrong side of a trade and cause systemic bank failures.

link to tyt.com

StukiMoi

1 year ago

Reply to Casual_Observer2020

“…systemic bank failures.”

If only…..

MPO45

1 year ago

So funny that you just posted this, was asking my wife if she turned off the A/C+electricity in one of our homes because I got the e-bill and it was $170 for an empty house with all electricity shutdown. The home has been vacant while she has been with me here in Chicago. The ‘delivery fee’ was nearly $70 though…those electric meters keep going up in price, should have stuck with the old metal wheel ones.

JackWebb

1 year ago

Reply to MPO45

But Chicago is so well run! Great liberal mayor there! By the way, our monthly customer fee out here in the benighted countryside is $20 and change, and the juice costs 9.63 cents/kWh. Those rates have not changed, but we will just have to live with the indignity of not being in Chicago. O! The horror! LOL

conservativeprof

1 year ago

Reply to JackWebb

Colorado under Democrat mandate, has 0.27 cents/kWh during peak summer times (3 to 7 PM) and 0.19 cents/kWh during near peak hours (1 to 3PM). The rate increases have only just begun.

JackWebb

1 year ago

Reply to conservativeprof

In our area, Bonneville Power sells wholesale to our local utility for 3.75 cents/kWh, with the difference between that and the retail rate of 9.63 cents used to run the utility. Bonneville sells to the Pacific Intertie that runs from the Columbia River dams to L.A. for 22 cents at wholesale. Suck it, California! LOL

TexasTim65

1 year ago

Reply to JackWebb

The real question is why Bonneville power would continue to sell to your local utility for 3.75 cents when they can sell for 22 cents elsewhere. Obviously a negotiated contract that likely runs yearly (or maybe for a couple of years). But next time its up, I would expect costs to rise because they can sell for more elsewhere.

Lisa_Hooker

1 year ago

Reply to MPO45

ComEd (Exelon in Illinois) executives and board have a revolving-door arrangement with the regulators, and Chicago and Illinois politicians.

Casual_Observer2020

1 year ago

Reply to MPO45

This will be the gotcha once everyone goes solar. Using .00001 kWh will be the same as using the maximum on the first tier.

TexasTim65

1 year ago

Reply to MPO45

That’s nothing.

Delivery fee for my parents in rural Ontario is over $200 bucks including tax. I was shocked when my dad told me his bill was 300+ monthly and then he showed me the bill and I understood why given they hardly use any actual electricity. People in town (10 miles away) pay next to nothing for their delivery fee.

It’s a huge scam given the power lines were put in decades ago when it was a government run entity.

Lisa_Hooker

1 year ago

Reply to TexasTim65

The courts have decided that you do not own the air above your land to insure the free flow of aircraft.

So the Government owns the air.

It is only a matter of time before the Government charges a fee for the delivery of sunlight through their air.

Fortunately fees are not taxes.

Webej

1 year ago

Reply to Lisa_Hooker

You forgot the fee for the oxygen you breathe.

For Consumers and Producers Electricity and Utility Costs Are Still Soaring

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