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When will energy prices fall?
Thursday 29 January, 2009
By becca.talbot@consumerchoices.co.uk
Gas and electricity prices across Britain increased at twice the rate of Europe’s average over the past year (29.7% compared with 15%), and while wholesale prices have dropped, energy bills have remained high.
After a year of extortionate price rises in the UK energy market, many British households hope that they may soon see cuts in their energy bills. But when will these cuts happen? And how can you reduce your bills and energy consumption in the meantime?
Energy prices falling
There are several factors that will influence and have an impact on energy bills falling:
- Public pressure - Following a drop in wholesale fuel costs, pressure on energy companies, from both customers and consumer groups to reduce prices may go some way to forcing down prices. But there has been little movement from the “big six” energy firms even when faced with government threats of a windfall tax and regulator calls for firm price cut plans.
- Competitive pressure - Britain’s “big six” energy suppliers tend to increase or cut their prices around the same time, so when one acts the others soon follow. While there has been a promise from Scottish & Southern energy to cut prices, British Gas has been the only supplier to lower prices so far.
Earlier this month the UK’s biggest energy supplier, British Gas (www.britishgas.co.uk), became the first company to reduce prices this year. The company promised to cut its customers’ gas bills by 10% from 19 February, reducing the average annual gas fuel bill to £793. However there has been no mention of lowering its electricity prices, which rose by 24% last year. - Wholesale price cuts - Back in July 2008, oil prices peaked at an all-time high of $147 a barrel. As a result, UK wholesale electricity prices more than tripled during the first nine months of 2008. But in November of the same year, global oil prices fell by 60% to their lowest level since January 2007.
Wholesale cost cuts, coupled with mounting public pressure can often lead to energy suppliers lowering their tariff prices.
Energy prices rising
There are also several reasons why energy prices might rocket again, so it’s important to understand how they are influenced by wholesale prices rising:
- Wholesale costs increase - Energy prices hikes are influenced largely by changes to wholesale oil and coal costs. These costs can rise or fall, depending on several factors, such as:
1. Fuel shortages (eg pipe leaks)
2. Wars
3. Disputes (eg Russian and Ukraine) - Fuel shortages – Because Britain is so heavily reliant on imported fuel sources, anything that happens to the global energy market will have a dramatic impact on our country’s energy supply, and ultimately the prices the energy companies charge for their gas and electricity.
It is because of this that many politicians and energy associations are pushing for more government spending on generating our own supplies.
Top tips to keeping energy bills low
- Keeping a close eye on the energy market will help you stay on top of any price or tariff changes. EnergyChoices.co.uk brings you the latest energy news as it happens, so make sure you subscribe to our RSS feed and email alerts.
Subscribe to our RSS newsfeed >>> - Following a bout of price cuts or price increases, it’s essential you compare the energy market to make sure you are on the best deal available. Price depend on where you live and how much energy you use.
Compare energy prices online >>> - When you’ve found a cheaper energy supplier, switching is easy and can be done online. It will save you money, not just because some suppliers are cheaper than others, but also because better deals are almost always offered to new customers.
Why switch energy supplier? >>>
Sign up to an online tariff and pay your energy bills by monthly direct debit for further savings.
How can I reduce my energy bills? >>>
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