Reeves under pressure to keep energy and fuel prices capped in spring statement as Iran war escalates
As missile attacks threaten refineries and shipping in the Gulf and Donald Trump’s war with Iran continues, Rachel Reeves is under pressure to prepare a contingency plan to deal with a shock rise in energy and fuel prices.
As the chancellor made his spring statement on Tuesday, he was joined by other Labor MPs in demanding proposals to deal with the ongoing crisis after European gas prices rose 40 per cent following Tehran’s latest retaliation against its Gulf neighbours.
Qatar Energy said it would halt production of liquefied natural gas, taking one of the world’s largest suppliers out of business indefinitely.
Meanwhile, Saudi Arabia’s Ras Tanura oil refinery was attacked by unmanned aerial vehicles, and defense teams shot down the incoming planes. Workers appear to have been evacuated from the refinery, which has a capacity of more than half a million barrels of crude oil per day.
Household energy bills could rise by up to £2,500 a year if the conflict in Iran causes a long-term disruption to global gas supplies, analysts have warned.
Shipping traffic in the Strait of Hormuz largely came to a halt after Iran attacked tankers in retaliation for the US and Israeli attacks that killed Iran’s religious leader Ayatollah Ali Khamenei.
The Strait is a critical funnel point for the flow of oil and gas from the Middle East. The UK’s benchmark gas price NBP rose by 54 percent on Monday. Brent crude oil, the global benchmark oil price, rose by nearly 9 percent to $79.40 per barrel.
Sir Keir Starmer told the House of Commons that Britain was taking measures to protect supplies but Ms Reeves faced pressure to take further action when she addressed MPs on Tuesday.
Graeme Downie, Labor MP for Dunfermline and Dollar and member of the House of Commons energy select committee, said: Independent: “The consequences of Iran’s actions can be felt quickly and painfully here in the UK, with rising energy bills, and those who have the least will be the ones to suffer the most.
“The government is already making significant improvements to energy infrastructure to increase resilience, and we have seen signs of acceleration to increase defense spending much more quickly. On both issues, the prime minister and chancellor need to take urgent steps to protect our country from external flows.”
It’s just three years since Russia’s invasion of Ukraine squeezed energy supplies and forced Liz Truss’ government to announce a £120bn bailout to limit household bills.
Wood Mackenzie Europe Gas and LNG Director Tom Marzec-Manser warned: “The prospect of around 20 per cent of the world’s LNG being cut off from the market has unsurprisingly led to a sharp rise in prices this morning. The next big question for traders will be how long the Strait will remain closed. Naturally, the longer it takes to reopen, the higher the price will rise.”
Stifel managing director and senior oil and gas analyst Chris Wheaton warned that a wholesale gas price of 250p per therm would translate into an energy price cap of around £2,500 a year.
he said Times“I think this will be caused by a tripling of prices, the current closure of the Strait of Hormuz, which has lasted more than six weeks, or the failure of the United States to keep shipping routes open.”
Meanwhile, the Liberal Democrats have also added their voices to calls for the Chancellor to abandon his planned 1p fuel duty increase.
AA chairman Edmund King said the latest turmoil “will inevitably lead to price rises” and “record prices at the pumps within 10 to 12 days” were expected.
Howard Cox of the FairFuelUK campaign said canceling the increase in this way would “not only be economically prudent (stimulating GDP growth and easing inflation pressures) but would also provide much-needed political relief to this government known for frequent U-turns.”
Independent He applied to the Treasury for opinion.
