UK energy bills could soar by £500 over Iran-US war, think tank warns
UK households are being warned that their annual energy bills could rise by £500 due to war in the Middle East.
Conflict in the region erupted dramatically after the US and Israel launched an attack on Iran, raising fears over supplies of oil and liquefied natural gas (LNG) from the Gulf.
QatarEnergy has halted LNG production, taking one of the world’s largest suppliers out of the market indefinitely. On the other hand, the traffic of oil tankers in the Strait of Hormuz has largely come to a halt.
As a result, latest figures show that the wholesale price of gas in the UK has almost doubled since the start of the war; This is described as “frightening” by consumer champion Martin Lewis. Brent crude oil, the global benchmark oil price, increased by more than 10 percent.
Following Chancellor Rachel Reeves’ spring announcement on Tuesday, think tank The Decision Foundation has issued a stark warning about the impact on UK household bills.
It said: “If recent increases in oil and gas prices continue, around a percentage point could be added to inflation and £500 to typical annual energy bills.
“The second increase would be particularly damaging for poor households, as they spend more than twice their budget on energy than rich households.”
The warning comes after many households were looking forward to a reduction in their energy bills after regulator Ofgem announced a drop in the price cap in April as part of the government’s pledge to cut annual bills by an average of £150.
On Wednesday, the Çözüm Foundation also predicted a one-off increase in living standards this year. Looking at inflation, wages and living costs, the think tank said living standards for typical working-age families would rise by £300 next year.
However, a sharp increase in wholesale prices could cause the energy cap to increase within three months and bills to start rising again.
Ruth Curtice, chief executive of the Resolution Foundation, said: “Next year will be good for living standards and a buffer year for poor families as wages and welfare support rise above inflation. But a new energy price shock risks puncturing this good news.”
But Mr Lewis highlighted the context of wholesale gas prices, highlighting the impact of the start of the Ukraine war, which has led to escalating accusations.
“I’m not saying it won’t get worse and it won’t be sustained, but I think it’s important to put it in perspective a little bit right now,” he said on Tuesday. “We are not in a Ukrainian-type surge right now, but it is on the rise.”
During her spring statement, Ms Reeves said she would meet North Sea industry leaders on Wednesday to discuss gas and oil prices as she faced pressure to draw up a contingency plan to deal with the problem.
The meeting with North Sea bosses will lead to speculation that tax burdens, currently set at 38 per cent, may be taken into account.
Graeme Downie, Labor MP for Dunfermline and Dollar and member of the House of Commons energy select committee, said: Independent He said the chancellor must take “urgent steps” to protect the country.
Speaking on Tuesday he said: “The consequences of Iran’s actions can be felt here in the UK with energy bills rising rapidly and painfully, and those who have the least will be the ones who will suffer the most.
“The government is already making significant improvements to energy infrastructure to increase resilience, and we have also seen signs of acceleration to increase defense spending much faster.”
