Energy bills are set to increase by £288 in July due to the ongoing conflict in the Middle East, households have been cautioned. Cornwall Insight, industry experts, have raised their latest forecast for Ofgem’s price cap by 18% to £1,929 per year. This surge in prices is a result of soaring wholesale energy costs triggered by the conflict between the US, Israel, and Iran.
Ofgem’s price cap restricts the unit rate paid by millions of households on standard variable tariffs, with the total bill depending on individual usage. Despite an expected 7% decrease to an average of £1,641 annually from tomorrow due to measures introduced in the Budget by Chancellor Rachel Reeves, the situation in the Middle East and a doubling of wholesale gas prices indicate a probable increase in the price cap come July.
The looming financial strain on households has intensified pressure on the government to offer targeted assistance. Cornwall Insight’s revised forecast of £1,929 per year is slightly lower than the previous estimate of £1,973 annually. This adjustment follows a stabilization in wholesale markets after a temporary halt in missile attacks on energy infrastructure and hopes for a potential ceasefire in the conflict.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, highlighted the unprecedented volatility in energy markets as a result of the ongoing conflict. He emphasized the inevitability of a price rise in July due to infrastructure damage and disruptions in marine traffic. Ofgem revises its price cap every three months based on wholesale costs and additional factors.
Minister for Energy Consumers, Martin McCluskey, assured that government actions would lead to a reduction in the energy price cap starting tomorrow, safeguarding households with lower bills. The government remains committed to addressing the affordability crisis, especially considering the potential impact of Middle East events on the cost of living.
