Household energy bills could rise by £160 a year from this summer after the conflict in Iran pushed the UK's gas market to a three-year high. A typical combined gas and electricity bill could reach £1,800 a year in Great Britain under the government's quarterly price cap from July, according to analysis by Cornwall Insight.
The forecast 10% surge in household energy costs follows a doubling of UK gas market prices after the US-Israeli attack on Iran. Tehran has retaliated by halting oil and gas shipments through the Strait of Hormuz, through which about 20% of global oil supplies and seaborne gas shipments pass.
Ofgem, the energy regulator, last month fixed household energy costs for April to July at £1,641 a year, a £117 cut from the previous quarter but lower than the £150 reduction promised by Chancellor Rachel Reeves. Ofgem will recalculate costs for the next quarter, taking into account recent market price rises.
Motorists are already facing a 2.5p per litre hike at petrol pumps since Saturday, while diesel prices have climbed more than 3p after the global oil benchmark rose above $81 a barrel. The UK's heavy reliance on gas for electricity generation and limited gas storage capacity have left it more exposed to market volatility than continental Europe.
Jonathan Brearley, Ofgem's chief executive, told MPs it was “genuinely too early to tell” how high bills may climb, depending on how long wholesale prices remain elevated. Energy Secretary Ed Miliband said the government was monitoring the situation, adding that the crisis is “yet another reminder” of the need to move away from fossil fuel dependence.
Chancellor Rachel Reeves met North Sea bosses to discuss the upheaval. A government source said she wants the energy profits levy to come to an end, but the Middle East crisis has had “real-time consequences” on oil and gas prices.
