Household Energy Bills Forecast to Surge by £332 Annually from July
Household energy bills are projected to jump by £332 a year starting in July, according to the latest forecasts from analysts Cornwall Insight. This significant increase is attributed to recent sharp rises in wholesale prices, which are expected to feed through into Ofgem's price cap for the period from July to September.
Price Cap Forecasts Escalate Amid Market Volatility
Cornwall Insight has revised its forecast for Ofgem's price cap, now predicting it will reach £1,973 per year for a typical dual-fuel household. This represents a 20% increase, or £332, compared to the cap set for April. The forecast marks a substantial step up from just over two weeks ago, when analysts had anticipated a 10% rise from July.
The independent energy consultants are updating their forecasts weekly as the US-Israel war with Iran escalates, creating volatility in the energy market. Cornwall Insight noted that household energy bills over the summer are likely to be higher than previously anticipated prior to the conflict in the Middle East, which has sent wholesale gas and oil prices soaring.
Impact of Wholesale Price Increases
Even if wholesale prices quickly return to pre-conflict levels, some of the recent volatility will be baked into the next price cap covering July to September. However, the final figure is subject to change, with the size of the increase depending on how long gas prices remain elevated and the duration of the disruption.
Ofgem's price cap is based on average wholesale prices over a three-month period. While the price most households pay for energy will fall by 7%, or £117 a year, from April 1 due to government measures removing green subsidies, gas prices have been climbing in recent weeks. This could affect future electricity prices and heating costs.
Recent Market Developments and Concerns
On Thursday, UK natural gas prices reached a three-year high after jumping by approximately 25% during the day, though they eased back slightly on Friday. The latest spike was driven by attacks on energy facilities in Iran and Qatar, raising fears about longer-term damage and disruption to gas supplies.
Shell reported that one of its key gas plants was damaged in the strike on Qatar, a facility used to produce fuel for transport and ingredients for plastics and cosmetics. Qatar's state-backed energy company, Qatar Energy, has halted production of liquefied natural gas (LNG) at its site since the beginning of March.
Watchdog Investigates Heating Oil Prices
Meanwhile, the UK's competition watchdog, the Competition and Markets Authority (CMA), has launched a market study into the supply of heating oil. This comes amid concerns that households relying on heating oil, particularly around 1.5 million in the UK with a concentration in Northern Ireland, are facing sudden price increases due to the conflict.
Heating oil is not covered by Ofgem's price cap, which currently fixes prices until the end of June. The CMA aims to assess how the supply of heating oil is impacting consumers and determine whether intervention is necessary to address market issues.
