Britain’s Energy Price Cap to Rise 13% in July, Cornwall Insight Says
Britain’s domestic energy price cap is forecast to rise by around 13% in July from current levels, analysts at Cornwall Insight said on Tuesday. The new cap would represent an increase of 13% on the current annual bill of £1,641.
The main driver for the increase is higher wholesale prices, which climbed in February and March after U.S. and Israeli missile strikes on Iran and subsequent Iranian attacks that damaged Gulf energy infrastructure and triggered the closure of the Strait of Hormuz, through which about 20% of the world’s oil and liquefied natural gas usually passes.
Wholesale Prices Drive Increase
Wholesale energy prices are the largest single factor contributing to British energy regulator Ofgem‘s domestic price cap, which is set on a quarterly basis using a formula that also reflects suppliers’ network costs and environmental and social levies. Although a temporary ceasefire has brought some calm to markets, wholesale prices have remained elevated.
Impact of Middle East Conflict
The bigger concern is October when demand picks up again and current forecasts point to a similar cap level as July. While the October cap will depend on how the Middle East conflict unfolds, even if the conflict were to end tomorrow, the physical damage to infrastructure and lingering effect of disrupted supply means a fall back to April’s price cap levels in the autumn looks unlikely.
Outlook for Energy Consumers
Energy bills are forecast to rise by £209 ($280) to £1,850 a year for a typical dual-fuel household from July. The increase will have significant implications for energy consumers, who may struggle with rising costs and uncertainty surrounding the global energy market.
Reporting by Nina Chestney. Editing by Mark Potter
Original Article: Britain’s energy price cap to rise 13% in July, Cornwall Insight says | Reuters — Reuters