The Institute for Fiscal Studies (IFS) has warned that rising energy prices could put further pressure on household budgets in the coming months, adding to the cost-of-living strain already felt by many families.
In its latest Green Budget, published on Monday, October 12, the organisation pointed to rising energy prices as one of the biggest problems facing the UK economy. The conflict in the Middle East has sent oil and gas prices higher, with the UK particularly exposed because of the energy it buys from abroad.
Sharp rises in oil and gas prices
According to the report, oil prices have climbed from around $60 a barrel at the beginning of the year to roughly $100. UK wholesale gas prices have also jumped from around 70p to 185p per therm, more than doubling.
Although these are not the prices households pay directly, increases in wholesale costs can eventually feed through to energy bills. This comes at a time when many people are already having to watch what they spend on essentials.
Wider economic impact
The IFS warned that higher energy costs will make the UK poorer, with businesses and public services also expected to feel the impact. There are concerns about inflation too, with prices potentially rising faster than previously expected.
Interest rates could also stay higher for longer, which would be another worry for households with mortgages and other borrowing. The report paints a more difficult picture of the economy than economists had expected earlier this year.
It could also leave Chancellor John Healey facing some tough decisions, as higher borrowing costs put further pressure on the public finances. For households, the latest warning suggests the pressure on everyday spending may not ease as quickly as many had hoped.
