Friday, November 16, 2012

Gas Price Manipulation? You don't say!

Part of the transcript from one of the so-called energy trading whistle blowers

The big news in the UK at them moment in certain newspapers is that various traders have been gaming the system to manipulate the market price.

As an ex gas trader in the very market that is currently attracting attention all I can say is: what took so long to figure that one out?

I mean, wow. I wrote a fictional story a decade ago about this based on my insider knowledge as a natural gas ops analyst and trader (within day and day ahead) working for a giant energy company, which I reheated last year and republished on this blog. The general thrust of my story is that it's not just prices that traders can manipulate but - potentially - the actual physical system as a whole. It really wouldn't be that difficult.

The actual allegations being made, in my opinion, are pretty minor and insignificant. What it might expose, however, could be far more important. The fact of the matter is that if you hand the entire system of energy provision over to private interests whose only raison d'ĂȘtre is to maximise profits, then of course they are going to employ the best brains to beat their regulatory overseers.

My personal take on it is this: so what if the energy market is experiencing price rigging under a privatised system? Would it be any different under a state owned one? Likely not. It's what we can expect of people when they are handed the controls of an essential commodity like energy from which vast sums of money can be gleaned. I'm not excusing the behaviour, just being realistic.

But my contention in the story was and is that it would only take one 'rogue' trader with operational authority to plunge not just the abstract market into chaos but the entire physical electrical grid. I'm just saying.

Disclaimer: I should actually say that I personally was never involved in any wrongdoing, and neither did I know of any traders involved in nefarious activities, although I did turn a few idling power stations down to MSG (minimum stable generation) when nobody was looking in order to reduce pollution and save fossil fuels.


  1. Whether the system is privatised or state-owned it is still under the control of human beings. This is the reason why there is, essentially, no difference between the two.

    1. Yes, everything controlled by people is subject to distortions.

      What amazes me is that people constantly expect otherwise.

  2. I am shocked- shocked- to hear that there has been manipulation of the gas markets.

    OK, in reality it is good to hear a perspective from someone who was an insider in the commodities market and at the same time an honest person who is willing to talk about it. There are so few institutions now worthy of trust, that I suppose I would be more surprised to hear that there was an actual functioning, transparent market for commodities.

    But that's not what I was going to comment about. What I really want to know is how you put together the dynamic sidebar that updates every time people post new contents to their blogs. It's pretty nifty. Do you mind passing on the secret? I kinda want to use it on eighthacrefarm. I need to update my template a bit.


    1. Hi Jeff.

      To get the blog update thing on the right just go into the CMS and click on 'Layout'. Then, on the right, click 'Add a gadget' and select 'Blog list' from the 'basic' options.

      From here you can just add the URLs of the blogs you want to appear, and you can also rename it.



I'll try to reply to comments as time permits.