The conflict in Ukraine could push the energy price cap to £3,238 a year from October, a report warns.
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Household energy bills could top £3,000 a year in England, Wales and Scotland from October, in part due to the Ukraine crisis, a report has warned.
The bank Investec said the conflict, along with surging global demand, had made gas and electricity prices soar.
It expects the energy price cap, which limits what suppliers can charge, to hit £3,238 a year for the average home when it’s next adjusted in October.
The cap is already due to rise by £693 to £1,971 in April.
Investec analyst Martin Young said a further rise in October, which would impact about 22 million households in England, Wales and Scotland, would be “devastating”.
He said such an increase would “plunge many people into fuel poverty”, with many facing an “eat or heat dilemma in the winter season”.
“Absent sharp and significant declines in wholesale prices, we expect a significant jump in the cap in October,” he said.
UK gas and electricity prices have been rising for months, due to surging global demand following the end of pandemic restrictions.
However, Investec said prices had risen even higher following Russia’s invasion of Ukraine and would remain elevated for months.
Russia is the world’s largest natural gas exporter, and there are concerns western sanctions could push President Vladimir Putin to “weaponise” his resources and constrict supplies to Europe.
That would drive up wholesale prices worldwide, including in the UK, which gets little of its gas from Russia directly.
‘High stakes’
Nathan Piper, oil and gas analyst at Investec, told the BBC: “Disruption to the flow of gas [from Russia to Europe] would result in extremely high prices with no real alternatives.
“So, we were tight in Europe with domestic production declining and the invasion of Ukraine has raised stakes higher.”
Energy bills have soared in the last six months due to a record increase in global gas prices.
It has led to almost 30, mostly smaller energy firms, going bust due to suppliers being unable to deliver price promises and has affected 4.3 million domestic customers.
It has come at time when the prices of food, manufactured goods and fuel are also soaring, squeezing household budgets.
The UK inflation rate is currently at a 30-year high of 5.5%.
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The government has said millions of households will receive energy bill discounts totalling £350 from October to ease the crisis.
However, £200 of this will be repayable, and Mr Young called the support “little more than a poorly disguised loan”.
“Energy is likely to intensify as a political crisis for the government,” he said.
“We suggest that a return to the drawing board is necessary to ensure support is there for those that need it, and if this means tough decisions for the chancellor then these decisions must be made.
- 31 January
