A lot of companies set up yearly contracts for their fuel. Last year while fuel was on the rise companies went for long term 1 year contracts with the anticipation the fuel was going to continue to rise to a given point of supply and demand balance at a given price. Generally the way most products work. The company I work for is still paying $4.29 a gallon of Diesel and will do so until the end of the year. That is the rate the corporate office locked in for us. We now have to figure out other places to make up for the cost over run in our overall heat rate. Which is based on Cost of making enough BTU's to make 1 Kilowatt hour of power.
The company I work for trades shares on the NY Stock Exchange. We have obligations to our share holders to make money for them. If we can not prove the business is viable and not make money for them they sell our stocks and the value goes down which results in less business capitol we can take short term loans on. At this point things continue to cascade and eventually we start closing plants, putting thousands of people out of work, and driving up the cost of the KiloWatt hour to a point that our remaining operating plants become profitable again. We already are planning on the closing of one plant in 2010. This was not due to it not being profitable, but rather the 300 million dollar cost of installing scrubbers does not make sense. It is better to close the plant, leave it sit and rot, find another piece of land, and build a brand new plant that meets current regulation. Now due to GM, Ford, and Crysler not making as many cars their plants do not run as much and use as much power. Then since they are not calling for as much steel and other materials those plants are not running as much and are not using as much power. Discussions are being made for an immediate closure of the plant to reduce supply and thus keep prices at a profitable level.
No it isn't the business that is greedy. It is the people who own shares of the companies that for some reason want to see their investment grow and not dwindle. You know all those people who have 401K programs and such. Those greedy people that push the companies to make money! Oh wait I'm one of them.
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