So, after having received the news from a foreign source on how much the government is purchasing electricity from Shanghai Electric and Eectrogas under corrupt contracts which were signed by Joseph Muscat, and renewed under Robert Abela, the next step is to know the government’s future plans for energy supply and electricity prices. The Maltese government is keeping everything secret with regards to our energy sector and its energy policy as it intends to keep the lid on an unfolding disaster in its attempt to make the problem away instead of addressing it strategically, openly and transparently. We have never had in our history a government so reckless, irresponsible and so destructive.
Every country in Europe is going through an open and transparent discussion on its future energy supplies and policy. In Malta we have Miriam Dalli who wants to sell us the idea of turning all of Malta’s agricultural land into solar panels while Enemalta goes bankrupt and corrupt politicians are protected from their dirty deals in energy.
Miriam Dalli did reveal one interesting detail, however. She said that Malta will be buying gas with an oil-index-linked price system. Basically, the price of gas is purchased against a correlation with the price of oil, and this can be of some concern if the government is buying gas at such high electricity prices with such a system because, in open markets, gas is relatively and historically way much more expensive than oil meaning there is more potential downside in gas than in oil if energy prices stabilise. The price of oil before the Russian war on Ukraine was around $64 (it is now at $100) while gas was below the $3 mark (it is now above $9).
Now, this is all speculation, and there is the risk that gas prices may even go much higher as Russia tightens its supply in its economic war against us. But there is another eventual probability which is very much inevitable. Oil and gas supplies in the world are abundant and high prices today are only due to the inability of Western countries to tap more supply. Ongoing gas projects in the North Sea and new gas supplies from Africa with a better grid connection with the Iberian peninsula will eventually ease supply constraints.
There is, however, a clear aspect in which the government is not being honest and it’s about the hedging part. Everyone mentions hedging and whatnots and it seems like people sound very clever and smart by using the word. We are hedging energy prices, they say and you would think they are very smart and clever because you don’t know what it means. Don’t worry, though because like you, they are clueless and do not know its real meaning.
Energy suppliers will sell variable-price systems as “hedging mechanisms” but they aren’t. Hedging is when you make a counter-trade against one of your trades to protect yourself against price volatility. It isn’t complicated, really. They make these words and concepts sound complex so they pretend they are better than you, but they aren’t. In practice, Miriam Dalli is telling us that she has made a trade in gas by buying a fixed supply for a number of years at a variable price and correlated with the oil price. That’s not a hedged position. A hedged position would mean that the Minister of Energy would have also bought a position which would go in its favour in case the price of oil stays high or keeps going higher. The government didn’t do this and the government isn’t hedged. If what Miriam Dalli is saying is true, the Maltese government made a bet that the oil price would eventually go down, but it is not hedged in the case that the oil price stays the same or goes up.
And there is another very glaring problem with the index-linked mechanism that the government is using to buy electricity. If we are buying electricity at these prices with oil at $100, our electricity prices will remain much higher than pre-war levels if oil goes back to $64.
So, given that I am one of the idiots paying for all of this with my taxes, can the Minister of Energy and non-extremist One Journalist, Miriam Dalli, please tell us, what the fuck is going on?