Energy Market Outlook for Q3 2018

By Tim Sealy-Fisher, Head of Key Accounts at Smarter Business

The recent spike in the price of oil and the knock-on effect on gas and electricity costs served as another reminder of just how volatile commodity energy costs can be.

Oil prices have increased 60% in the last year alone due to a rise in demand and restricted supply by the Organisation of the Petroleum Exporting Countries (OPEC).

In May this year, oil prices spiked to over $80 a barrel for the first time in almost four years, largely due to President Trump’s decision to reintroduce sanctions against Iranian oil. Meanwhile, the economic and political crisis in Venezuela – a country with the largest proven oil reserves in the world – has caused its oil output to decline to its lowest levels in decades.

Spikes in the price of oil feed straight into gas and electricity prices – following the surge in oil prices in June this year we saw winter 2018 prices reaching 65.00 p/th and £58.40/MW respectively.

Along with the price of oil, many other factors also affect gas and electricity prices:

The closure of the Rough facility led to limited gas storage capacity in the UK.

Gas storage facilities in Europe are at a 10-year low for this time of year.
The UK’s limited gas storage capacity makes us particularly vulnerable when we experience cold spells, as demonstrated by the gas deficit warning during the ‘Beast from the East’ at the end of February 2018, which sent intraday gas prices to 300p/th. Winter 2018 could potentially be very volatile again, especially if storage facilities are not refilled in time.

Reduced production from Groningen (Europe’s largest gas field) over the next few years will also tighten supply.

Summer maintenance schedules restrict supply. These unplanned outages make the task of restocking storage facilities much harder.

It is also essential for organisations to manage their electricity non-commodity costs, which continue to rise.

The government recently announced a consultation on widening eligibility for the current Energy Intensive Industry exemption scheme. The proposed changes would mean that more British businesses will benefit from a reduction in their energy bills – potentially lowering the threshold from 20% to 10% for energy-intensive industries.

As with the current scheme, all other customers would have to support this initiative through an increase in their costs. This could come as soon as 1st April 2019 for CfD and FiT (if introduced) and 1st April 2020 for RO. The numbers below indicate the impact this could have across RO, CfD and FiT charges.

The Modern Day Suit

The suit as we know it today can be traced back to its creator Beau Brummel who became the arbiter of fashion more than one hundred and fifty years ago. The dandy style of that era was later epitomised by artists such as David Bowie, Mark Bolan and Bryan Ferry of Roxy Music and became known as glam rock style. Many styles have evolved over the years, such as double breasted, three button, broad to narrow lapel and back again. However the basic structured and shape of the modern day suit has changed little over the past one hundred years. We’ve been locked into repetitive style cycles of the original concept for many decades. Currently the two button single breasted with a more tailored silhouette is standard, with the younger generation opting for what is known as bum freezer. In this case the jacket is cut very short at the base of the torso, trousers low rise, similar to the old fashioned hipster with stove pipe trouser legs to complete the look.

Suiting was first commercialised on Savile Row, the oldest and most famous of all tailoring precincts in the world. Tailors started doing business there around 1803. With Henry Poole credited for creating the very first dinner suit. It later became known as the Tuxedo, named after Tuxedo Park in New York State, an American Indian term meaning moving water. Kings, Princes wealthy industrialists, Hollywood movie stars and rock music stars carved a path to Savile Row spending millions of dollars on luxurious suits made from the finest Australian Marino Wool. In the early 60’s Tommy Nutter opened for business in the early 60’s financially backed by Cilla Black. He became famous for reinventing Savile Row. The first to have open window displays which caused some controversy, this practise was considered brash by old school tailor traditionalists who generally worked behind closed doors. Nutter dressed the Beatles for the famous Abbey Road album cover. Other clients include Mick Jagger, Bianca Jagger and Elton John.

Soon after Spencer Tracey passed away his long-time partner and confidant Catherine Hepburn travelled to Savile Row to pay a visit to the tailor that made Tracey’s suits. She ordered a pair of tailor made denim jeans and unintentionally gave birth to the dress jean trend of the 70s. Based on this innovation Richard James another contemporary of Savile Row tailored suits made of selvage Denim woven in Japan.

Renowned Italian woollen mill and suit maker Zegna have been buying the best super fine Marino wool from Australia since 1910. Apart from their ready-made off the peg apparel, they receive 60 to 80 special orders a year for suits that will set you back $34,000. Zegna are carrying on the Savile Row tradition using the finest quality cloth available.

The demand for bespoke suiting has declined dramatically over the past three decades. The range of cuts and price point available in department stores is a major contributor to the decline in sales on Savile Row, with many tailoring firms having to downsize and tap into the mainstream ready-made market. Now one can purchase an off the peg Italian made suit in super fine Marino wool for under $2,000.

The modern day suit survives, however fewer men tend to wear them, opting for a more casual style. Large accounting and law firms have taken the step away from tradition and for many suit and tie is no longer a standard dress requirement for the office. Is this a good thing? I think not; it demonstrates a lack of self-discipline and self -respect. Men are easily swayed by office peer group pressure and will generally follow the crowd. Those who choose to step out and dress up are the long term winners, so suit up and get positive comments.