I thought the reason they were increased is so we could get the same power with reduced supply?
However a fair few power companies are reaching ridiculously high record profits, which goes against the grain of that idea.
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The oil and gas companies, are capital intensive and things take a long time to materialize. The two major components (excluding exploration) are oil production and oil refining. Both require multi billion dollar investments and are very fine tuned to the supply (kind of oil) and the market (how much the market demands). Both these factors cannot be adjusted quickly for capacity or to switch supply. Investment in these areas take years to get online and the capital is depreciated over decades and it is a global market.
In the US and probably in much of Europe, investment in new production and refining have dropped significantly in the last decade. Governments and consumers have been signaling the death of oil and gas with major legislative policies.
Normally, the available capacity matches demand fairly closely. Given recent problems, supplies of oil and gas have been disrupted. This has led to very unusual demand patterns especially when Russian supply and refining capacities are limited. With less supply and normal demand, buyers start to bid up prices. Oil is a global market so Europe having shortages means countries there are buying up oil and refined product wherever they can.
Unsurprisingly, companies are reaping high profits even as prices go up. In a more “normal” circumstance, new and existing players would start to bring more production online and invest in capacity thereby reducing their profits. But that is simply not happening because the major companies probably don’t see any long term recovery of capital given current policies to reduce oil/gas usage. So they’re simply taking the profits and returning it to investors rather than reinvestment.
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