As supply issues have been exacerbated worldwide by the Russian invasion of Ukraine, the wholesale price of imported oil and natural gas had spiralled upward.
According to The Guardian, the current energy crisis in the UK stemming from the Ukraine conflict cost the equivalent of £1,000 for every adult.
But now, even though the wholesale gas prices in the UK have started to drop, Britain’s energy cost is not decreasing sooner—residents won’t see the benefits until the second quarter of the year, reported The Conversation.
Energy Costs Showing No Sign to Decrease Sooner
Inflated wholesale prices cause residents to encounter hikes to their energy bills.
Wholesale energy prices have started decreasing from their peaks in summer 2022, but a substantial lag is expected before these feed through to consumers.
Now, with falling wholesale prices, the new Ofgem price cap is yet to be announced.
The energy experts predict the energy price cap to see a sharp fall by the second half of the year when the plunging gas prices will be able to impact the hedging strategies and season-ahead contracts.
It means that the benefits of decreasing gas prices won’t be felt sooner.
Ofgem is about to announce the price cap for the second quarter of the year this February.
Cornwall Insight forecasts the UK’s energy price cap to slip from its present record-high rate of £4,279/year to £3,294/year in April and to £2,200 from for the next six months.
Even though it would be a sharp decline from current levels, the price is still very high—Ofgem cap was between £1,000-£1,200/year before the Ukraine conflict made fossil gas costs reach record highs.
However, setting an Ofgem price cap is the process that ensures an energy supplier can recoup their costs; it doesn’t essentially cap the consumers’ bills.
Based on the estimations, energy experts anticipate the energy bill to soar from the current amount of £2,500/year to an average of £3,000/year or above from April 2023 for the following 12 months.
It will be much higher than the forecasted price cap of £2200/year from July.
Prices are capped by whichever is the lower—Ofgem price cap or Energy Price Guarantee (EPG). It means, the residential energy bills are expected to decrease from the second half of the year since the price cap will fall below EPG by then.
However, even if energy prices drop as anticipated, they will still be around 70% higher than in winter 2021/22.
What Can Be Done Now?
With energy prices continuing to soar, plans must be rendered to help consumers ease the energy cost.
As the UK faces soaring inflation and increased cost of living, residents are encouraged to keep their energy demand reasonably in check.
Experts advise UK residents to turn down the flow temperature on their boilers to 60°C or below to knock about £160 off their annual energy bills.
Again, for households looking to reduce their energy waste while also supporting their energy bills, servicing boilers annually by leveraging an affordable and reliable service like Mulgas Boiler Care Specialists is a sensible decision.
Maintaining boiler service check-ups ensures homeowners are running their heating systems efficiently, and it can also help lower their energy bills.
Britain’s over-reliance on fossil gas has been a leading cause behind its soaring energy bills. With that said, emphasis must be placed on increasing renewable power generation to curb the reliance on fossil fuels significantly.
Renewable energy generation can help the UK hit the Net-Zero goal by 2050 while also boosting its energy security and knocking off a substantial amount from the household bill.
Until July, consumers will see little benefits of falling gas prices. However, proper steps should be taken to lower energy consumption.