Latest news with #energyPrices
Daily Mail
25-05-2025
- Business
- Daily Mail
Flawed system leaves millions paying too much for energy bills, says GABRIEL MCKEOWN
Gabriel McKeown is head of macroeconomics at Sad Rabbit. Inflationary pressures have eased considerably from the peaks reached in late 2022. Yet households across the country continue to grapple with the lingering effects of a prolonged cost-of-living crisis. Prices for essential goods and services remain significantly higher than historical norms. Despite reassurances of an economic recovery on the horizon, many consumers are yet to experience meaningful relief. One of the most notable contributors to these persistent high costs has been the energy sector. Even with a sizeable drop in wholesale natural gas prices, bills are remaining stubbornly high for consumers. Even with a cut to the price cap on the horizon, this represents a delayed response to wholesale prices that fell many months ago. Consumers have been stuck paying elevated rates, and are long overdue a reduction in the cap. This situation has intensified calls for policy intervention and market reform. The paradox of energy pricing The energy market has had a tumultuous few years. Wholesale gas prices plummeted in the spring of 2020, as Covid-19 lockdowns strangled economic activity. They then surged by late 2021 due to supply bottlenecks following the global re-opening. This was further compounded by the Russia-Ukraine conflict, which saw UK and European wholesale gas prices spike to record levels. They briefly rose by ten times from the pandemic lows. Households were largely sheltered from this immediate energy cost jump, thanks to the retail price cap administered by Ofgem, combined with massive government subsidies when that proved insufficient. The price cap had already risen 54 per cent in April 2022 but was set to soar a further 80 per cent in October 2022. This resulted in emergency intervention in the form of the Energy Price Guarantee (EPG). Yet the market is far from static. Despite British families seeing energy costs leap to record highs in 2022, by early 2023, a combination of mild weather, ample gas storage in Europe and reductions in demand brought wholesale prices down sharply. Unfortunately for consumers, the regulated price cap was slow to follow. It wasn't until mid-2023 that the cap fell below the government's EPG level, providing some relief. By Autumn 2023, the cap stood at around £1,568 for a typical household. This still far exceeded the pre-Covid average of below £1,000. Furthermore, as of early 2025, the average bill under the cap remains 52 per cent higher than in the winter of 2021 and 2022. This illustrates how far energy costs have diverged from the baseline. The supplier-consumer divide With Europe enjoying relatively mild weather and benefiting from increased non-Russian supplies, wholesale gas prices were on a clear downward trend at the beginning of this year. Yet households were told to expect higher bills once again. Gas prices had dropped to levels not seen since mid-2021. But to justify this latest rise, Ofgem pointed to a brief wholesale price spike that occurred during the cap's assessment window in February. However, by the time the cap increase was announced, those market prices had already fallen back to previous levels. Yet this earlier spike had now been baked into consumer rates for months to come. Consequently, Ofgem declared that the energy price cap would rise by 6.4 per cent from April. This has resulted in households paying an additional £111 annually, and marked the third consecutive quarterly increase in the cap. This highlights a crucial flaw in the UK pricing system. The price cap is not a real-time reflection of market prices but is instead based on future wholesale prices averaged over the prior period. The aim is for this to smooth volatility in prices. But in this case, suppliers had bought much of the energy for spring 2025 during late 2024 and early 2025 when prices were higher. In effect, household prices right now reflect the wholesale market of several months ago. This leads to a gap between the latest energy prices and the bills facing consumers. The energy regulator confirmed that energy bills will fall by £129 in July. Energy supplier profits The energy supplier sector has undergone a significant transformation during this period. It has shifted from a group of loss-making firms on the brink of collapse in 2021 to an arguably healthier state overall, thanks to consolidation and improved profitability. The UK has ended up with an energy system where the risk of high wholesale prices was largely shifted to taxpayers. This was achieved through significant government subsidies and ongoing elevated bills. However, the rewards of higher prices were reaped primarily by the producers and some well-hedged suppliers. This comes at a time when many households are still grappling with energy costs significantly elevated from pre-crisis levels, resulting in widespread energy debt. More than three million households have now fallen behind on payments, exacerbating the living standard collapse experienced over the past few years. The promise of market reform Combatting these issues was a core policy point during much of the election campaigning last year. Yet Labour, which came to power partly on promises to address the energy crisis, faces growing criticism as high bills persist. The government has started to implement policies aimed at reforming the energy sector, such as establishing GB Energy, a publicly owned entity designed to increase the UK's clean energy capacity. But these measures offer limited immediate relief to households. To truly address the foundational issues facing the sector, it will require far broader policies. There needs to be a reassessment of how consumers fit into the energy sector's business model. Energy suppliers naturally defend their hedging practices as essential for market stability. Purchasing energy through forward contracts is necessary to manage risk in rapidly fluctuating markets. They can claim that this protects both themselves and consumers from unpredictable price swings. However, the past few years have shown that while suppliers are insulated from short-term market volatility, consumers feel the direct and prolonged impact of past wholesale price spikes. Even when consumers seek relief from escalating prices via fixed-rate energy deals, which are increasingly available at prices below the current capped rates, these options do not address the structural problems embedded within the UK's energy pricing model. An uncertain future As long as wholesale and retail prices remain disconnected, structural inequities will persist. Addressing these systemic flaws will require immediate reform of pricing mechanisms. It will also need sustained long-term investments in British energy independence. A particularly important area of potential reform is a reevaluation of geographical differences in standing charges. These have drawn criticism for exacerbating regional household inequality. There is also mounting support for introducing targeted social tariffs. These would provide direct financial relief to vulnerable groups that are most impacted by energy market volatility. Aligning Britain more closely with several European peers. Along with offering a viable short-term solution, while longer-term structural adjustments are implemented. Without such actions, British consumers will continue facing elevated bills despite falling wholesale energy prices. This will leave them to bear the brunt of system-wide inefficiencies that have yet to be meaningfully addressed.
The Independent
21-05-2025
- Business
- The Independent
Pressure mounts on Chancellor as inflation races to highest for more than a year
Inflation has rocketed to its highest level in more than a year after 'awful April' bill rises, but pressure is also mounting on the Chancellor over the impact of Labour's recent tax hike on the cost of living. Official figures show Consumer Prices Index (CPI) inflation jumped to 3.5% in April, up from 2.6% in March and the highest since January 2024. It comes after Ofgem's energy price cap rose by 6.4% in April, having fallen a year earlier, alongside a raft of bill rises for under-pressure households – including the biggest increase to water bills since at least February 1988. Households were also hit with steep increases across bills for council tax, mobile and broadband tariffs, as well as road tax. But experts said inflation may also have been pushed higher as many firms responded to the Government's move to raise national insurance contributions (NICs) and the minimum wage last month by increasing prices. Chancellor Rachel Reeves acknowledged her policies have 'consequences' but insisted they are necessary to stabilise the economy. Asked if the inflation figures had been pushed up by measures including the hike in employers' national insurance, she told broadcasters: 'When I became Chancellor last year, I faced the very difficult challenge that there was a £22 billion black hole in the public finances. 'We had to fix that, and if we hadn't done the Bank of England would not have been able to cut interest rates four times this last year, which has obviously had a direct effect on the mortgages and the rents that people pay. 'I do recognise that all policies have consequences, but if I hadn't have acted to stabilise the public finances, we would be in a worse position today.' Shadow chancellor Sir Mel Stride blamed Labour's 'damaging' tax increase for the rise in inflation and said 'families are paying the price for the Labour Chancellor's choices'. The Liberal Democrats also took aim at Labour, warning the cost of living could spiral out of control unless Ms Reeves reverses her decision to increase employer NICs. The larger-than-expected rise in inflation was the biggest since October 2022, at the height of the energy crisis, according to the Office for National Statistics (ONS). Economists had been expecting a rise to 3.3% last month. The figures may see the Bank of England tread more cautiously with cuts to interest rates after this month's reduction from 4.5% to 4.25%, economists said. Rob Wood, at Pantheon Macroeconomics, said he believes inflation will stay around 3.5% for the rest of the year. He said: 'We think the Monetary Policy Committee will have to proceed cautiously. 'We stick with two more rate cuts this year, but are very close to reducing that to only one.' Investec economist Philip Shaw said he believes April's painful rise will prove to be the peak and will start to come down as wage growth and energy prices ease back. 'We stand by our view that the committee will bring the Bank rate down twice more to 3.75% by the end of this year,' he said. The unwelcome increase back above 3% comes after some recent respite, with inflation having fallen for the two previous months. The ONS said water inflation across housing, water and energy bills surged by 7.8% in the year to April, which was the highest since June 2023. Within this, water and sewerage charges raced 26.1% higher during April. Air fares also contributed to the inflation jump, rising by 27.5% during the month due largely to the timing of Easter, which was the second highest monthly increase since records began. The ONS said these increases were 'partially offset by falling prices for motor fuels and clothing, driven by heavy discounting for children's garments and women's footwear'. Elsewhere, the data showed the ONS's preferred measure of inflation, Consumer Prices Index including owner occupiers' housing (CPIH), rose to 4.1% in April from 3.4% in March.
NHK
21-05-2025
- Automotive
- NHK
Japan logs first trade deficit in 3 months
Japan posted its first trade deficit in three months in April. The Finance Ministry says it will keep a close watch on the effects on trade of the US Trump administration's additional tariffs. The deficit stood at 115.8 billion yen, or about 800 million dollars. Exports grew 2 percent from a year earlier to 9.15 trillion yen, or roughly 63.5 billion dollars. Car shipments to the US dropped in value for the first time in four months by 4.8 percent on the back of a stronger yen. Imports fell 2.2 percent in yen terms to 64 billion dollars. This was mainly due to cheaper coal and crude oil, as energy prices fell.
Telegraph
21-05-2025
- Business
- Telegraph
Live Inflation surges more than expected after Reeves tax raid
Inflation surged by more than expected last month to its highest level in a year, official figures show, as Rachel Reeves's tax raid hit the economy. The consumer prices index (CPI) rose to 3.5pc in April, according to the Office for National Statistics. It brings inflation to its highest point since January 2024. The jump was higher than the 2.6pc recorded in March and higher than the 3.3pc that had been forecast by analysts. Inflation jumped as households were slapped with a 6.4pc increase in the energy price cap at the start of April, which took average annual bills to £1,849. Businesses were also hit with a 6.7pc increase in the national minimum wage last month, which was announced during the Chancellor's tax raising October Budget. Bosses also had to contend with rises in employer National Insurance contributions, which economists had warned would lead to companies passing on rising costs to consumers. Responding to the figures on Wednesday morning, Ms Reeves said: 'I am disappointed with these figures because I know cost of living pressures are still weighing down on working people.' In a post on X (formerly Twitter), Mel Stride, the shadow chancellor, said: 'This morning's news that inflation has jumped to 3.5pc – well above the 2pc target – is worrying for families, and the Bank of England expect it to rise even further. 'We left Labour with inflation bang on target, but Labour's economic mismanagement is pushing up the cost of living for families - on top of the £3,500 hit to households from the Chancellor's damaging jobs tax. 'Higher inflation could also mean interest rates stay higher for longer, hitting family finances hard. Families are paying the price for the Labour Chancellor's choices.' Kris Hamer, director of insight at the British Retail Consortium (BRC), added: 'Rising inflation was inevitable following the wave of additional costs hitting employers, and particularly retailers who employ over three million people across the country. 'For months retailers have been warning that rising costs would lead to higher prices. To mitigate this, the government must now find ways to help reduce business costs and regulatory burden. 'It is imperative that its Employment Rights Bill targets unscrupulous employers and avoids burdening responsible businesses with additional costs which could put retail job numbers into reverse.'
Wall Street Journal
09-05-2025
- Business
- Wall Street Journal
New York and New Jersey Need Natural Gas
President Trump's plan to kick-start the 124-mile Constitution Pipeline between Pennsylvania and New York is a much-needed breath of fresh air for energy customers in the Northeast. Natural gas prices soared in New York over the winter, with many parts of the state seeing rates close to $20 per million British thermal units in January and February. In Pennsylvania, by contrast, prices averaged just over $3 per million Btus. That price difference is a function of New York's misguided environmental policies. Neighboring New Jersey's policies are no better. Environmentalists in the Garden and Empire states have been steadfast in opposing any new pipelines even as prices for consumers and businesses have steadily risen.
