Why gas prices are hitting record highs

Why are our gas prices so high? Rachel England from One Home – a climate action organisation which gives advice on sustainable living - explains.

MILLIONS of households in the UK are facing their most expensive energy bills for a decade thanks to a perfect storm of factors pushing wholesale gas prices up by 250% since the start of the year.

Additionally, many energy providers – particularly smaller firms – are facing closure as a result of the record high prices and supply shortages. Here’s what’s happening, and how you can cut your gas bill.

What has happened to make gas prices so high?

The current price spike is the result of several factors. Firstly, while the UK is seeing especially high prices, this increase is a reflection of high gas prices globally – countries around the world have seen a price increase, albeit not to the same extent as the UK.

Secondly, Covid-19. As countries gradually recover from the pandemic and begin opening up their economies, demand for gas has risen. This, coupled with a cold winter, has led to a gas market with reduced capacity.

Other contributing factors include delayed maintenance work due to the pandemic, lower than usual supplies from Russia and increased deliveries to Asia leading to less liquefied natural gas reaching Europe. The UK also had one of its least windy summers since 1961, meaning wind power has been low.

Energy firms buy gas and electricity wholesale, and with higher demand and limited supply, prices have skyrocketed.

What does the gas crisis mean for my energy bills?

Households can expect to see their energy bills rise in the coming months.

If you are on your supplier’s default tariff, your bills will go up from 1 October as energy regulator Ofgem has lifted its price cap. If you’re currently on a fixed tariff, you will almost certainly have to move to a more expensive deal if it comes to an end within the next few months.

Bear in mind that standard variable tariffs are the most expensive, so it is always worth switching to a green energy supplier.

According to Ofgem, customers should prepare for an average price rise of £135 this winter. ,

What happens if my energy supplier goes bust?

Nine energy companies have gone bust so far this year, including HUB Energy, PFP Energy, MoneyPlus Energy, Utility Point and People’ Energy. Others, such as Bulb, have hinted that they may be in financial trouble.

However, if your energy supplier goes out of business, Ofgem will ensure you are moved to a new supplier without any disruption to your supply. Customers affected will be contacted by the new supplier, which will be chosen by Ofgem.

The new firm won’t have to honour the deal you were on with your previous provider, but any credit on your account will be protected.

It’s a good idea to have a meter reading ready for when they contact you.

What is the government doing about this?

Government has ruled out scrapping the energy price cap, which is good news for customers. The energy price cap is the maximum price suppliers are allowed to charge customers on a standard tariff, and is designed to protect customers from sudden price spikes. Removing the energy cap could result in bill increases much higher than the £135 Ofgem has warned.

What can I do about my rising energy bills?

Unfortunately, there’s not much you can do about the increasing cost of gas, however, you can keep your bills as low as possible by ensuring you’re using your energy as efficiently as possible. A well-insulated home is your first line of defence against rising energy bills – make sure your house is warm and cosy this winter.

The bottom line

Gas prices are on the rise, leaving millions of householders will increasingly expensive bills during what is often the most expensive time of the year. But you can cut your energy demand by ensuring that your home is well-insulated and that you’re taking steps to manage your energy efficiently.