Rising energy costs leave consumers to foot the bill

Soaring wholesale gas prices were blamed for the round of bill hikes at the start of this year. But energy costs have kept on rising since then, leaving customers facing the prospect of further bill increases this year.

Pressure on gas imports to the UK amid rising world demand, record oil prices and a weaker pound compared to the euro have helped fuel the wholesale price rises.

British Gas owner Centrica said that average month-ahead costs for gas and electricity are 92 per cent and 100 per cent more expensive than a year ago. The company warned that it would take the "necessary action" to protect its profit margins - widely seen as a warning retail bills may have to rise.

Historically, the UK has benefited from lower gas prices during the summer due to domestic overproduction and easily available imports. But with hydrocarbons such as gas and oil now viewed as a scarce resource, there has been more intense competition for supplies from the continent.

Factors the UK is facing include the increased use of air conditioning across Europe in countries like Spain and Italy over the past years.

Since the start of the year, the Interconnector sub-sea pipeline, which provides a link between UK and Continental European energy markets, has mainly flowed from Europe to the UK through the 143-mile (230km) pipeline between Bacton in Norfolk and Zeebrugge in Belgium.

With European gas prices linked to the cost of oil, that means UK gas imports have been exposed to the fuel's spiralling prices. Crude oil is now more than $125 a barrel, a rise of more than 25 per cent since the start of the year.

Further pressure has come from the weakening pound, which has slid around 14 per cent in value against the euro during the last six months.

In order to attract gas away from the continent, the UK has to offer a price above the local price in the Netherlands, Belgium of France. Because the pound has fallen so much over the past six months, that price is now higher than it might otherwise have been.

Yet another price pressure has been global competition for supplies of Liquefied Natural Gas (LNG), which come into the UK through shipments.

Image: Customers face the prospect of further bill increases this year

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