Homeowners were today given a stark warning that energy prices could spike again next winter even to levels that would force the Government to step in once more to protect consumers.
Fatih Birol, the head of International Energy Agency, said soaring demand for energy from China as its economy continues to bounce back from Covid would send prices higher, particularly if Europe and North America suffer a harsh winter at the same time.
Speaking on BBC Radio 4’s Today programme, Birol said: “In a scenario where the Chinese economy is very strong, buys a lot of energy from the markets, and we have a harsh winter, we may see strong upward pressure under natural gas prices, which in turn will put an extra burden on consumers.”
His warning came days after the cap on average energy bills fell sharply to £2074 at the weekend, well below the Government’s £2500-a-year energy guarantee safety net.
It was the first time energy bills have dropped in more than two years. Wholesale energy prices have fallen dramatically since the highs of last August and September, in part because Europe enjoyed a milder than average winter that suppressed demand. Energy analyst Cornwall Insight predicts that the cap — set every three months by regulator Ofgem — will drop again in October to £1978 before rising back above the £2000 mark in January with a price cap prediction of £2004.40.
Ofgem’s next price cap announcement will come in August. Birol is the latest senior energy industry figure to caution that the energy crisis, while easing, has far from run its course.
Chris O’Shea, chief executive of Centrica, the owner of British Gas, told the BBC last week:” “I think the first act of the crisis is over.
“I think what we’ve got to remember is that energy prices had more than doubled before Russia invaded Ukraine.
“Now, prices are back down to pre-invasion levels but they’re still two-and-a-half times the long-run average,” O’Shea said.
In his interview today Birol said he could not rule out blackouts in the winter, which he thought could be “part of the game”.
He said that the UK Government should “continue to push measures to save energy, especially as we enter the winter”.
Ministers should also push renewable technologies so they “see the light of day as soon as possible” and cut the time it takes for them to get permits, and look for “alternative energy options”.
His warning came as benchmark European natural gas prices rose by as much as 7% this morning to the highest level in almost two weeks.
A UK Government spokesperson said: “We spent billions to protect families when prices rose over winter covering nearly half a typical household’s energy bill, with them set to fall by around £430 on average from this month.”
