Three ways to combat energy bill rises as Iran-US war sparks price hike fears
Donald Trump’s war against Iran has sparked turmoil in the Middle East as Tehran retaliated by targeting multiple countries.
The conflict has sent shockwaves around the world, but UK consumers are worried about the impact on their energy bills.
It may seem like a trivial concern under the circumstances, but it’s real enough.
The good news, at least in the short term, is that the price most households pay for gas and electricity will fall by an average of 6.7 per cent from 1 April, when new Energy Price Cap rates are introduced by regulator Ofgem.
Someone who receives a typical energy bill will see their annual charge drop by around £117 if they use standard variable tariffs, which is more than 60 per cent of homes.
But the conflict in the Middle East has experts worried that energy bills will rise in the medium and long term. Oil and natural gas resources are at risk because energy transportation routes are in the center of conflict zones. Markets are nervous.
Analysts at investment bank Stifel, the Office for Budget Responsibility, have warned that average energy bills could rise to £2,500 a year, an increase of around £1,000 for many people, with “very significant implications for the global and UK economies”.
There are three things consumers can do to reduce energy price increases.
Make sure your schedule and readings are correct
Make sure you don’t pay more than you should have in the first place. Maybe post meter readings once a month, take photos, and also keep an eye out if usage increases for no apparent reason. The new generation smart meters already do this automatically. If you receive benefits such as a pension or universal credit, check if you are eligible for government support. This year the Warm Home Sale was worth £150.
Switching off devices rather than leaving them on standby can save up to £50 a year. Turning down your heating system by just one degree could save more than that, according to British Gas, which estimates that turning down your thermostat by one per cent could save between £90 and £145 a year, or around 10 per cent of the average bill.
Rory Duff, co-MD of renewable energy installer Hometree Finance, said: “As energy prices rise again, households must be prepared for prolonged fluctuations. With global prices out of everyone’s control, families can take steps to prevent their bills rising. Small steps make a real difference: servicing boilers, improving insulation, adjusting heating schedules and lowering the thermostat even by one degree can reduce bills without affecting comfort.”
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Fix your tariff quickly
The upcoming April price cap will last until July. If you’re not already tied to fixed tariffs beyond that, act quickly.
Current market-leading deals include Outfox the Market at £1,509 per year, Fuse Energy at £1,515 and Eon Next at £1,543 per year.
Price comparison site Uswitch reckons there could be savings of up to £250 a year for savvy consumers. The Money Saving Expert recommends locking in for 12 to 18 months to ensure price stability without keeping you out of potential low rates for too long in case the market changes significantly.
Your energy provider will give you more details.
Buy shares of oil giants
One thing a stock-savvy consumer can do is buy shares of BP or Shell. Oil majors pay dividends to investors, which means an infusion of cash even if stocks don’t rise.
BP shares yield more than six percent interest; which is generally higher than Shell, which is £60 on a £1,000 investment.
AJ Bell broker Russ Mould says: “BP and Shell are forecast to contribute between 10 per cent and 11 per cent of the total pre-tax profits analysts expect the FTSE 100 to make between 2026 and 2027.
“The two major oil companies combined are expected to deliver 11 per cent to 12 per cent of total FTSE 100 cash returns in the form of dividends and share buybacks in 2026 and 2027. This is down from the last few years due to BP halting its buyback and only includes buybacks Shell has announced to date. But there could be more.”
The easiest way to buy shares is to open an account with one of the major retail stock brokers. AJ Bell, Interactive Investor and Hargreaves Lansdown are established players with good reputations.
What else could come next?
Experts at Deutsche Bank fear high interest rates and high fees.
Analyst Sanjay Raja says: “For the Bank of England, while the 2022 energy shock is still evident, fears of persistent inflation are likely to grow if energy prices remain at current levels (or rise further). Indeed, if they hold, such moves would meaningfully disrupt the UK’s disinflation trajectory and raise concerns about second-round effects next year, including sticky inflation expectations. This could support wage settlements next year and interest rate cuts both.” It may raise doubts about both its speed and its scale.”
