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Households warned gas price spike could pile fresh pressure on energy bills
Confirmed
In Short: Europe delayed its summer stockpiling due to high wholesale gas costs, leading to a reliance on international markets where prices are already at three-year highs.
The Department for Energy Security and Net Zero (DESNZ) has warned that the UK has almost no gas in storage for the coming winter, a situation that is a 'huge concern' for energy security.
Analysts predict that gas prices could top €80 by the end of the year, with a potential increase in energy bills for businesses and consumers. The government has pledged to cut VAT on energy bills from October and is working to reduce reliance on natural gas.
The European benchmark natural gas price has reached its highest level since late 2022, with UK prices also hitting their highest point since the same period. The renewed fighting between the US and Iran is expected to keep the Strait of Hormuz closed, further driving up prices.
What's confirmed
What's still developing
- Europe, which delayed its summer stockpiling due to high wholesale costs sparked by the Iran war, had been gambling the conflict would end before winter and prices would in turn fall.
- Even then, there will be a lag before energy is flowing freely through the strait and pressure on energy prices are eased.
- "The risks to gas prices are definitely tilted towards the upside," Hussain told the BBC, warning that the gas price would top €80 by the end of this year.
- Dr Craig Lowrey, principal consultant at Cornwall Insight, told the BBC on Thursday a fresh increase in wholesale prices would "increase pressure on our January price cap forecast".
- The department also pointed to Prime Minister Andy Burnham's pledge to cut VAT from energy bills from October, as well as government action to reduce Britain's reliance on natural gas altogether. Ángel Talavera, chief European economist at Oxford Economics, said there is a "glass half full, and a glass half empty" picture unfolding.
- "It's serious, but not catastrophic," he told the BBC, adding "something would have to dramatically change to lower prices".
- Talavera said gas prices could come down if the weather helps reduce demand and the Strait of Hormuz reopens sooner than expected.
- Households across the UK are being warned to brace for higher energy bills this winter as European countries scramble to replenish their natural gas stores before the weather dips.