Welcome to Furious Friday!
I recently saw a news article about Australians being “promised new laws to slash up to $832 from their annual electricity bills”
This article outlines;
How will this work?
Let’s look at the stats, and the claims that there will be price savings on electricity
What price capping actually does, comes back to my favourite thing - The Supply vs Demand equation
Lack of power - Rolling blackouts
Long term effects of price ceilings
Rolling blackouts in developed countries sometimes occur due to economic forces at the expense of system reliability (such as in the California electricity crisis of 2000-2001).
Okay, lets look to a developed nation, and specifically, California in 2000-200.
California had a shortage of electricity supply caused by market manipulations, and a capped retail electricity prices was one major factor
There are many other examples of asset pricing, like New York housing (which lead to it becoming derelict), gas shortages in the USA, and many others… (if you are interested, let me know)
How do we solve this?
The average bill is $1576 p.a. in Australia, where as in France it is $1178 pa (731 Euros) – 34% lower
If it is done well it is the best solution to the electricity price issues. Either cap prices = No power for anyone, or increase supply through more power with no environmental pollution
As always, thanks for listening!