GAS prices have rocketed 250% since the beginning of the year, with some detrimental effects passed down the line to households.
Just since August, wholesale gas prices have gone up a staggering 70%, so we explain why this is the case and how it affects you.
1
Why are gas prices going up?
Post pandemic demand and lack of supply is being blamed for the rise in costs.
High demand from Asia, low supply from Russia, a fire affecting imported French electricity, and a lack of wind for wind turbines have all added to the problem too.
The UK also imports more than two-thirds of its gas which is subject to global price swings making prices more volatile and likely to rise.
The average wholesale gas price was 83.26p per therm at the end of last month, up from 48.29p six months ago, in February.
That is passed on to households through rising energy bills as wholesale gas accounts for around half of your energy bill.
The rest is made up of operating, admin and policy costs and VAT, but these will always be added on top of whatever the wholesale costs is to start with.
We’ve also explained four charts that show why gas prices are rising previously too.
Will it get worse?
Consumer energy bills could also rise even further as the government hasn’t ruled out raising the price cap beyond the October hike.
The cap is due to be reviewed again in April, so households could see prices worsen in only six months’ time.
This year the cap has risen twice in the space of the same year for the first time, while also being at its highest ever cost.
There’s nothing to say this won’t go up further though.
Major energy firms like EON have called for the government to scrap green levies as a way to ease pressure on the industry.
But the result of this will either mean more energy firms collapse if nothing is done to reduce pressures, or consumers will have to keep forking out to cover the costs passed to them by an increased cap.
Critics have recently warned that vulnerable households next month will face having to choose between heating and eating as a combined result of the ongoing crisis.
Who’s been affected by the rising gas costs?
Rising gas prices have a knock-on effect on other energy sources too.
Natural gas is used to produce around a third of the UK’s electricity supply for households and more across the country.
Currently household suppliers are forking out for the hiked costs as the government’s energy price cap limits what they can pass on to customers.
That cap though, is set to rise by £139 a year, from £1,138 to £1,277 in just over a week’s time.
But not only has this rise in household bills proved to be a financial burden for everyday people, but it’s meant the rising gas costs have caused a number of energy firms to go bust in the process.
A number of energy firms supplying 700,000 households have already gone bust in the past six weeks, including Utility Point and People’s Energy, and only yesterday came the news of Green and Avro ceasing trading.
We’re also aware that Bulb, which has 1.7m customers, and Igloo Energy, with 100,000 customers of its own, have asked for Government bail-outs, too, suggesting they’re struggling.
There are warnings another four providers could go bust this week alone.
Some experts have predicted that 60 suppliers could go bust by the end of the year, which would leave just 10 suppliers in the market.
But other industries have also suffered as a result, with the food sector being one of those.
The rocketing gas prices have forced carbon dioxide (CO2) processing plants to shut meaning supermarket meat and frozen food supplies could be hit as well.
Plus supply of fizzy drinks, draught beer and more have all be affected as a result of the ongoing crisis.
Is there any way to cut down my hiked bill at home?
While you can’t avoid the price cap rise that is coming into force on October 1, you can take the opportunity to cut down on your own energy consumption or even look around for the best tariff of what’s left available.
There are also ways struggling Brits can lower their own costs, with winter schemes designed to shave money off your energy bills.
These include things like warm home discount scheme and winter fuel payments as well as the cold weather payment scheme.
But if you happen to be affected by the collapse of certain energy companies we also have advice on what to do next.
But you shouldn’t rush into switching provider, which is usually the first port of call when looking to save some pennies on your your tariff.
Lisa Barber, Which? home products and service editor, said:”Ofgem will appoint new energy suppliers to take over and protect any credit customers have so they can be reassured they won’t be cut off or lose their money.
“We’d recommend taking a meter reading as soon as possible to ensure the transition is as smooth as it can be.”
Government preparing for gas prices to remain high for ‘longer term’, says minister
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