According to the most recent, gloomy projection for home bills, the energy price cap will continue to be above £3,500 per year for the majority of 2023.
The forecast, made by energy consulting firm Cornwall Insight, comes as households prepare for what is expected to be the most difficult winter in decades, with expenses rising on almost every front as inflation reaches levels not seen in 40 years.
When the price cap increased by more than 50% to £1,971 in April, the cost-of-living crisis—which had first been brought on by demand exceeding supply as economies resumed normal operations after Covid-19 restrictions—gained momentum.
People are currently focusing on cost of living and food value. Since the start of the crisis in Russia and Ukraine, energy-driven inflation has ratcheted up a notch and is now rampaging across the global supply chain as the price of a variety of commodities, including natural gas, has increased.
The average annual bill was anticipated to reach £3,359 in October and then increase steadily until peaking at £3,729 in April 2023.
Following that, it will start to decline, albeit gradually, reaching £3,569 in July before falling to £3,470 in the final three months of 2023.
After BP announced record earnings for the final quarter of its fiscal year, Cornwall Insight predicted on Wednesday that household energy costs will likely stay higher than 2.5 times their pre-crisis levels at least through 2024.
NOTE: According to the firm, the predictions were made based on market trends that have since turned out to be more dismal than anticipated. In response to Western sanctions on Moscow, Russia will shut off the water supply to Germany through the Nord Stream 1 pipeline.
Its current pumping rate of only 20% has increased worries throughout Europe that a supply shortage may cause a squeeze over the winter. Russia's economy, which depends on it, would eventually fall into recession as a result of the strong demand.
» Currently, EU countries are bound by a voluntary pact to cut their gas consumption by 15% to help maintain inventories.
» Despite the UK depending on Russia for less than 5% of its yearly gas supplies, the race for alternative sources on the continent is unavoidably impacting the wholesale price.
» Although UK wholesale prices have historically been about 30% less expensive than those sought after in other parts of Northern Europe, this difference is anticipated to close as the nights grow longer.
» According to a new analysis by National Grid, the UK's power outages this winter are unlikely.
Currently, EU countries are bound by a voluntary pact to cut their gas consumption by 15% to help maintain inventories. Despite the UK depending on Russia for less than 5% of its yearly gas supplies, the race for alternative sources on the continent is unavoidably impacting the wholesale price. Although UK wholesale prices have historically been about 30% less expensive than those sought after in other parts of Northern Europe, this difference is anticipated to close as the nights grow longer. According to a new analysis by National Grid, the UK's power outages this winter are unlikely.
However, experts have cautioned that a severe cold spell could require the implementation of measures, such as peak demand non-critical industry shutdowns, to guarantee that houses can stay warm.
We have less than a month until the new price cap is announced, and due to wholesale market trends and worries about Russian supplies, Craig Lowery, principal consultant at Cornwall Insight, said: “Unfortunately, the only modification to the projection is likely to go up.”
While the increase in estimates for October and January is a serious worry, what makes these new forecasts so catastrophic is not just the magnitude of the increases, but also their longevity.
Although the government has promised to provide some support for the increase in energy prices in October, the truth is that the £400 allocated would barely begin to address this issue. Our cap projection has jumped by more than £500 since the cash was first suggested.
For the most vulnerable households, the assistance amount increases to £1,200. The topic has become into a crucial flash point in the Tory leadership contest. To prepare for the anticipated increase in the price cap level in October, the prime minister will either be Liz Truss or Rishi Sunak, the former chancellor who approved the measures.
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