British families are alerted that the days of low energy prices have come to an end, with an anticipated increase in bills next year.
On Monday, Investec forecasted that by January, the energy price cap would exceed £2,000, signifying its first hike in a year.
Although the current price cap is £2,074, it’s projected to decrease to £1,923 by October, marking its third consecutive decrease as natural gas prices stabilize.
Nevertheless, Martin Young, a top analyst at Investec, anticipates the cap to ascend again to £2,083 by January 2024, intensifying the financial strain on families.
Young stated, “While we’ve seen a reduction from previously alarming price cap levels, we’re still approximately at the £2,000 yearly rate, significantly higher than past rates.”
He added that society should brace itself for the reality that low energy prices won’t be returning in the foreseeable future.
Prior to the Ukraine crisis, the annual price cap was £1,277.
Following the Ukraine conflict, there was a notable spike in gas prices, causing the energy price cap to peak at £4,279 last winter. Thankfully, the government intervened to mitigate the impact on households.
The projections made by Mr. Young highlight growing concerns regarding the stability of Europe’s gas provisions for the winter, despite the continent having record storage levels for this period.
Recent events have heightened investors’ anxieties. These include potential disruptions in Australian exports of liquified natural gas due to strikes and concerns over how an especially cold winter or greater demand from Asia might strain worldwide supplies.
Mr. Young’s estimate is based on forward UK gas prices being 142 pence per therm for the upcoming first quarter, in contrast to Monday’s spot price of nearly 80 pence a therm.
The January price cap, still under consideration by regulator Ofgem, will be influenced by the observed forward prices for natural gas from mid-August to mid-November.
Furthermore, Mr. Young emphasized that Europe is still navigating the challenge of fully replacing Russian gas. Several EU countries, including Austria, continue to depend on gas piped from Russia via Ukraine.
Nevertheless, the EU’s gas storage currently exceeds 90%—surpassing a target set for November 1—which offers a significant safety net as winter begins.
Last month, the European Commission reported that reserves amount to over 93 billion cubic metres of natural gas.
