Gas prices are dropping – so why isn’t your bill?

In desperate times, you need to take drastic measures. There are many money-saving tips available in a world where energy bills continue to rise.

Some people are thrifty and suggest setting an egg timer when you’re showering. Some recommend that you turn off the water as you work up a lather, while others suggest going back to old-fashioned strip washing, which I find a bit extreme. This is not middle age.

Many of us look forward to the day when these types of washing life hacks will no longer be necessary.

However, in spite of an apparent inability of the country to gauge its mood, the energy industry seems to have come to a different conclusion. They believe we should just shrug off the fact that higher bills will be here to stay.

Anders Opedal is the boss of Equinor, an oil and gas exploration company backed by Norway’s state, which produced 2m barrels per day in 2021.

Tony Hayward, former boss of BP and chairman of Glencore, a commodities super-giant, supports the call. Both Hayward and BP’s former boss Tony Hayward support the call.

The pair may have wanted to help Blue Monday, which is the most depressing of the year if they believe in such marketing gimmicks. Their premise, whatever it is reasoning, should be rejected. It is simply air cover to keep prices high in a sector.

Opal’s intervention came at a time when European gas prices were already falling to levels not seen since before Russia invaded Ukraine. This raises hopes for a sharp drop in household energy bills, but it is unlikely that it will happen.

Analysts have dramatically reduced their forecasts due to a halving in prices since mid-December. Combining high gas storage levels, mild climate, and lower consumption, has brought down UK prices below 170p/therm after a record-breaking August high of over 600p.

This is three times higher than what was normal before the energy crisis in 2021. However, the Dutch front-month gas futures have dropped to their lowest level since September 2017. It is possible that it is premature to speak of “back to normal”, according to consultancy Cornwall Insight, but the trajectory is clear.

Experts at HSBC reduced their expectations for European-traded gas by around 30pc in 2023 and 20pc the year after that – large falls that could impact bills as forward supply contracts begin to run out.

Campaigners call on suppliers to immediately respond and lower their bills to match what is happening in the wholesale market. UKHospitality represents hundreds of leisure venues and pubs. It is asking Ofgem for urgent help after discovering a list of “reckless behaviour” by suppliers. These include raising standing fees, imposing high deposits, and offering rates that are much higher than wholesale.

This is similar to the “rocket-and-feather” approach in the petrol market. Prices on the forecourt go up as soon as they are available, but retailers are slow to pass on any savings that may result from wholesale costs falling.

The transition to net zero will not be without its costs. Opedal speaks of “a type of rewiring the entire energy system in Europe”, which will “need be paid for”. It is almost as though Opedal has forgotten the original cause of the current price shock by suggesting green investment will keep the bills high.

All of Western Europe is now suffering from the effects of being too dependent on foreign oil and gas imports, mostly from Russia. Recent data from the International Monetary Fund (IMF), showed that gas prices are higher in the UK than in any other European country.

The UK’s net zero push has already begun – the UK’s emissions have been halved from 1990 to 2020 – and it is certainly not the adoption of green technologies that are causing record-breaking bills.

According to separate research by the Energy and Climate Intelligence Unit, customers could have seen huge savings if the UK had used renewables like rooftop solar panels and heat pumps more quickly. Last year, the average savings was approximately £1,750.

It is not easy for the oil and natural gas industry to speak bluffly about more clean energy investment, given the prevailing lethargy. BP, for instance, channelled £300m to “low carbon” projects during the first half of 2022 – which is equivalent to 2.5pc of its £12.2bn profits.

Equinor, Europe’s second-largest gas supplier, is Gazprom’s Russian counterpart.

We cannot allow profiteering and scaremongering to impede progress. Both household suppliers and energy producers must find a middle way that allows bills to be more affordable while real investment in renewables takes place.

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