Energy News

Gas prices plummet but consumer bills still high

Tuesday 21 October, 2008

By hazel.cottrell@consumerchoices.co.uk

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Energy suppliers are failing to pass on falling oil and gas prices to customers, Gordon Brown and Consumer Focus have warned.

The prime minister and Ed Mayo, chief executive of Consumer Focus (www.consumerfocus.org.uk), are putting increasing public pressure on energy suppliers to cut their gas and electricity prices in line with falling world oil prices.

Ed Mayo has demanded “immediate action” from energy suppliers, he said: “Oil prices have been falling since July, yet consumers have seen unprecedented rises in their gas and electricity costs. Consumers must now be wondering why they are left waiting. Ofgem needs to take action on the wholesale markets and the artificial link between the price of oil and gas which makes energy prices higher in the UK.”

Crude oil has fallen 44% in price since July 2008, yet gas prices have gone up 51% since the start of 2008 and electricity prices by 28%. This has put the average annual household energy bill at £1,308.

Some energy suppliers increased gas prices by more than a third this year, blaming the rise on soaring world oil prices, but now oil prices have fallen by half. After reaching an all-time peak of $147 a barrel earlier this year, a barrel of North Sea oil now costs around $73. Wholesale gas prices have also fallen by more than a quarter but household bills have not been reduced at all.

A spokesman for Gordon Brown said: “What we have seen is prices going up for fuel and energy when the oil price went up and now that the oil price has come down, the public would naturally expect retail prices for fuel and household energy to come down as well.”

However, energy suppliers themselves say that they currently have little scope for price cuts. In order to protect themselves from fluctuating markets, energy suppliers tend to buy their gas supplies at an agreed price months if not years ahead.

Garry Felgate, chief executive of the Energy Retail Association (www.energy-retail.org.uk), which represents major energy suppliers, said: “As gas is bought through long- and short-term contracts on the wholesale market, there is always a time lag between when the wholesale price rises or falls and when customers’ domestic bills rise or fall.”

Chris Eagle, commercial manager at EnergyChoices.co.uk comments on the situation: “Despite the political pressure being applied to energy suppliers, it’s unlikely that we will see domestic gas and electricity prices decrease any time soon."

"Unfortunately, the big energy suppliers have already bought their gas for the winter and will likely keep their prices set as they are. To ensure your bills are as small as possible, you should compare energy tariffs to find the cheapest for your home and reduce your energy bills by practising energy efficiency.”

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