British households face an average annual increase of £196 on their energy bills from July, as the price cap is forecast to rise to £1,837 for a typical dual fuel household. The surge, predicted by Cornwall Insight, comes amid continued volatility in wholesale markets, exacerbated by the ongoing conflict in the Middle East.
While this represents a lower increase than the £332 rise initially feared in early March, which would have pushed bills to £1,973, experts warn that wholesale markets remain unstable. Despite the slight easing from initial price spikes, consumers will still contend with significantly higher gas and electricity costs as the geopolitical fallout continues to drive up energy and oil prices.
Ofgem, the energy regulator, is due to announce the next price cap level by May 27. The current cap, set between April and June, saw a 7% reduction to £1,641, largely due to the government's commitment to cut bills by removing green subsidies.
In anticipation of this substantial jump in costs, the government has indicated it is exploring further targeted support for households as part of its contingency planning. Additionally, electricity bill support was recently extended to 10,000 firms, offering some relief to businesses not covered by the household price cap.
Wholesale energy costs are not seen coming back down to pre-war levels until the Strait of Hormuz, through which a fifth of the world’s oil and seaborn gas is carried, is reopened.
Its blockage and the disruption to supply, combined with attacks and stoppages at energy infrastructure across the Middle East, has sent gas prices soaring and the cost of crude surging as high as 120 US dollars a barrel at one stage since the conflict began.
