The energy price cap will remain above £3,500 a year for most of 2023, according to the latest dire forecast for household bills.
The prediction from energy consultancy Cornwall Insight comes as families prepare for what is likely to be the harshest winter in decades, as costs mount on almost every front inflation reaches values that have not been reached for 40 years.
That Cost of Living Crisis – initially caused by demand outstripping supply as economies restarted after COVID restrictions – picked up steam in April as the price cap rose more than 50% to £1,971
Energy-driven inflation has picked up a gear to ravage the global supply chain ever since Russia’s War in Ukraine began when a number of commodities, including natural gas, rose in price.
It’s the rising wholesale price of gas that’s causing the bulk of energy bills.
This was announced by Cornwall Insight on Wednesday shortly thereafter BP announced record profits that household energy bills in the final quarter of the fiscal year are expected to remain at more than two-and-a-half times their pre-crisis levels through at least 2024.
It predicted that average bills would reach £3,359 per year from October and continue to rise until peaking at £3,729 from April 2023.
After that it will start falling, but only slowly, reaching £3,569 from July before hitting £3,470 in the last three months of 2023.
The consultancy explained that the forecasts were based on market trends that have recently proven grimmer than fears that Russia will do so turn off the taps to Germany on the Nord Stream 1 pipeline in retaliation for Western sanctions against Moscow.
It’s currently pumping at just 20% of its capacity, fueling fears across Europe that a supply shortage during the high-demand winter months will result in a bottleneck and ultimately push Russia-dependent economies into recession.
EU countries are currently bound by a voluntary agreement to save 15% on gas to help conserve supplies.
The scramble for alternative supplies on the continent is inevitably affecting wholesale costs in the UK, even though the country relies on Russia for less than 5% of its annual gas supplies.
The UK wholesale cost was around 30% lower than the cost charged elsewhere in northern Europe, but this gap is expected to narrow as the darker evenings roll in.
A recently National Grid report saw little chance of the lights going out in Britain this winter.
But experts have warned that a major cold-weather event could force measures such as non-critical factory shutdowns during peak demand to ensure homes stay warm.
Craig Lowrey, Principal Adviser at Cornwall Insight said: “We have less than a month until the new price cap is announced and given wholesale market trends and concerns about Russian supply unfortunately the only likely change to the forecast is up be.
“While the increase in October and January forecasts is a matter of urgency, it is not just the level but the duration of the increases that makes these new forecasts so devastating.
“While the Government pledged some support for October’s energy surge, our cap forecast has risen by over £500 since funding was proposed and the truth is that the pledged £400 will only scratch the surface of this issue.”
The support package increases to £1,200 for the poorest households.
The issue has become a central battlefield in the Tory lead race either Rishi Sunak, the former chancellor who signed the measures, or Liz Truss will be prime minister before the price cap is expected in October.
The charity National Energy Action last month predicted that 8.2 million British households, or one in three, would be affected by fuel poverty if the average bill reached £3,250 a year.
Energy price cap to remain above £3,500 through most of 2023, report warns | business news
Source link Energy price cap to remain above £3,500 through most of 2023, report warns | business news