Energy markets ‘in turmoil’ due to Middle East, says Octopus Energy boss
Energy markets are in “turmoil” due to the intensifying Middle East conflict, a leading energy chief has warned, as the situation is already affecting UK households.
Octopus Energy CEO Greg Jackson said the “very challenging market” had led the energy provider to increase fixed-price tariffs and introduce exit charges as oil and gas prices rose.
Some other major suppliers also withdrew their fixed-price offers altogether in the wake of the conflict.
Data from Uswitch reveals that the availability of such deals has dropped by more than half in the week since the attacks between Iran and US-Israeli forces began. The remaining fixed deals, which are closely linked to wholesale costs, also experienced significant price increases.
As exchanges continued, Iran threatened to attack any ship passing through the Strait of Hormuz, an important route for world oil trade, saying it would “not allow even a single drop of oil to leave the region.” The United States has said it may begin escorting tankers through transit to restart trade.
This led to an increase in the wholesale gas rate, which has almost doubled since the beginning of the war. This figure is a major driver of UK energy prices.
The majority of UK households remain subject to variable tariffs and are therefore protected by the energy price cap set by regulator Ofgem. This will fall by around seven per cent in April due to policies Labor announced last year. However, some experts predict that the current situation could now see a 10 percent increase announced in July.
Greg Jackson, chief executive of Octopus Energy, told Times Radio the company had to pass on some increases in wholesale energy prices to fixed-rate customers.
He said: “Fixed tariffs are based on the fact that on the day you want to take out the fixed tariff, the energy company goes to the wholesale market and buys a year’s worth of energy for you, and the new fixed tariffs are higher because the wholesale market now reflects at least some of the cost increases resulting from the effects of the war in the Middle East.
“Some companies do not offer these prices at all because they do not trust that they can fix these prices a year in advance.
“When you see fixed tariffs, they are now often hundreds of pounds more expensive a year than they were a year before the conflict.”
Many experts have now urged households to consider a fixed-rate energy deal, which guarantees customers will pay a set rate for their energy over a set period of time, usually a year.
Octopus has also introduced an exit fee for customers wishing to exit these agreements since the conflict began, but Mr Jackson stressed that many other suppliers had already introduced such fees.
He added: “I am following the situation very closely.
“In terms of energy, Iran has effectively closed the Strait of Hormuz, which carries 20 percent of the world’s oil and gas resources, and Qatar has said it cannot fulfill gas distribution contracts, so energy markets are in turmoil.
“The wholesale price of gas has roughly doubled since a week ago.”
