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Why are gas prices so high and what is happening to fuel bills? Why are gas prices so high and what is happening to fuel bills?
(21 days later)
The cost of gas on the wholesale markets is soaring again, placing renewed pressure on suppliers. Householders in the UK will find out in the next few weeks how much their gas bills are likely to increase in the coming year.
It is also having an immediate impact on some businesses' energy bills. The energy regulator is due to announce the new energy price cap - the maximum amount that suppliers can charge in Great Britain.
Many thousands of households have seen energy prices rise. after their supplier went bust. Millions are set for a huge increase in prices in April when a new cap comes into force. It's expected to rise steeply, because global wholesale prices have gone up so much.
Why are gas prices so high? What's going to happen?
There has been a worldwide squeeze on gas and energy supplies. Every six months, Ofgem, the energy regulator, reviews the maximum price that suppliers in England, Wales and Scotland can charge domestic customers on a standard - or default - tariff.
As a result, wholesale energy prices rose sharply and, in recent weeks, have hit their highest levels of 2021. This is called the energy price cap.
Reasons include: About 15 million households saw their energy bills increase by 12% when it was last updated in October.
A cold winter in Europe last year put pressure on supplies and, as a result, stored gas supplies were low The next review is due at the beginning of February, and the new cap will come into effect in April. Industry predictions suggest gas prices could go up by as much as 50%.
A relatively windless summer meant it was difficult to replenish those supplies There is a separate energy market in Northern Ireland, with two gas suppliers, and prices have risen sharply for consumers there too.
There's been increased demand from Asia - especially China - for liquefied natural gas. Why have prices been rising?
There are a number of technical and geopolitical issues at play as well, which means many countries across Europe are grappling with the same problems. There's been a worldwide squeeze on gas and energy supplies over the past year.
However, the UK is hit relatively hard hit because it is one of Europe's biggest users of natural gas - 85% of homes use gas central heating, and it also generates a third of the country's electricity. Storage capacity in the UK is lower than in some other European countries. As a result, wholesale gas prices have risen to unprecedented levels. At the end of December, they hit a new record of 450p per therm, which experts think could take average annual gas bills to about £2,000 next year.
What's happening to household gas bills? Reasons for the increase include:
About 15 million households saw their energy bills rise by 12% in October. a cold winter in Europe in 2020/21, which put pressure on supplies and, as a result, meant stored gas supplies dropped
This is because the energy price cap has risen. This sets the maximum price suppliers in England, Wales and Scotland can charge domestic customers on a standard - or default - tariff. a relatively windless summer meant it was difficult to replenish those supplies
The cap will go up again in April, after a review by the regulator Ofgem. Industry predictions suggest it could go up by another 50%. increased demand from Asia - especially China - for liquefied natural gas
In Northern Ireland, there is a separate energy market with two suppliers, and prices have risen sharply for consumers here too. There are a number of technical and geopolitical issues at play as well, which mean many countries across Europe are grappling with the same problems.
Can I get a cheaper deal or fixed tariff? However, the UK is hit relatively hard-hit because it is one of Europe's biggest users of natural gas. Around 85% of homes have gas central heating, and it also generates a third of the country's electricity.
Usually, consumers are encouraged to shop around when energy bills rise. Storage capacity in the UK is also lower than in some other European countries.
What effect has this had in the UK so far?
Since wholesale gas prices started to spike, more than 20 retail energy suppliers have collapsed in the UK.
This is largely because the energy price cap prevented retailers from passing on higher wholesale prices to their customers.
Several smaller companies, with fewer reserves, could not weather this.
Failed firms include Bulb Energy, with 1.7 million customers. Because of its size, it was put into "special administration", and is now run by the government, through Ofgem.
Nearly four million customers have been affected. Many households saw their energy prices rise when their supplier went bust, and they were switched over to a more expensive deal with another supplier.
What can I do if my energy supplier goes bust?
Can the government intervene to keep prices lower?
The government faces calls from energy companies, the opposition, and even some of its own MPs, to do more to prevent prices from rising too much.
Suggestions include:
scrapping the 5% VAT rate on household heating bills
suspending environmental levies which fund renewable energy schemes
a windfall tax on North Sea gas and oil producers
increasing the number of people eligible for the warm homes discount plan, which currently offers a one-off payment of £140 to those in receipt of certain benefits
How can I protect myself from rising prices?
In the past, consumers have been encouraged to shop around when energy bills rise.
But at the moment better offers - including fixed deals - are simply not available.But at the moment better offers - including fixed deals - are simply not available.
People already on fixed deals are advised to stay put.People already on fixed deals are advised to stay put.
Wrapping up to stay warm as energy bills rise
How can I save money on my bills?
Instead of searching for a cheaper deal, householders are being encouraged to improve the energy efficiency of their homes.Instead of searching for a cheaper deal, householders are being encouraged to improve the energy efficiency of their homes.
The Energy Saving Trust says that changes to our homes and habits could offset the current price rises. The Energy Saving Trust says that simple changes to our homes and habits could offset the current price rises.
How are energy prices affecting business? How are rising energy prices affecting business?
Many companies face a considerable rise in their bills. That could mean they have to:Many companies face a considerable rise in their bills. That could mean they have to:
reduce or pause production - or even cease trading - which could cause job lossesreduce or pause production - or even cease trading - which could cause job losses
pass their increased costs on to customers as higher prices pass their increased costs on to customers through higher prices
Energy-intensive industries are particularly exposed, but every company that has to pay energy bills - even if it is just to heat an office or shop - will be affected. Energy-intensive industries are particularly exposed, but the problem affects every company that has to pay energy bills - even if it is just to heat an office or shop.
Across Europe, governments are asking energy-intensive commercial users to turn down factories in order to make savings and ease the knock-on impact. Firms call for help over surging gas prices
Which suppliers are going bust?
Since wholesale gas prices started to spike, more than 20 retail energy suppliers have collapsed.
They have been unable to pay higher prices for gas, or pass all of the increased costs on to customers.
These failed firms include Bulb Energy, with 1.7 million customers and which because of its size was put into "special administration", where it is run by the government, through Ofgem.
What can I do if my energy supplier goes bust?
Nearly four million customers have been affected.