UK households and businesses are facing almost £10bn in additional energy and fuel costs due to higher oil and gas prices since the Iran conflict began, analysis from the Energy and Climate Intelligence Unit (ECIU) reveals.
The research also suggests British industry’s additional bill reaching £31m per week, as higher wholesale oil and gas prices since the start of the US-Iran war on 28 February added an estimated £9.8bn to UK energy and road transport costs.
The figures includes more than £5bn in higher gas and electricity costs that are expected to feed fully through into bills next year, alongside around £4.7bn in additional road fuel costs already being paid by motorists.
It shows that, for every week the conflict continues, UK gas and electricity users are likely to face a further £190m in excess costs on energy bills, with the full effects being felt in 2027 as wholesale gas prices feed through into contracted energy rates. This comes on top of around £183m per week in additional road fuel costs already being seen at the pump.
Analysts Cornwall Insight recently said energy bills are forecast to rise a further 9% in 2027, putting an average January bill up to £1,872 a year. This is due to gas price spikes over recent weeks combined factors including the summer heatwave across Europe.
The increase in wholesale gas prices is projected to add more than £160 to the average household dual-fuel energy bill next year if prices remain high.
Even if the conflict ends, gas prices are expected to remain high, due to infrastructure damage to the Ras Laffan gas site, which may have mid-term impacts on liquefied natural gas (LNG) markets.
At the same time, higher petrol and diesel prices have already pushed average household road fuel spending up by 14% – equating to £76 per household to-date.
British industry, the commercial and public sectors are also seeing higher costs, with an extra £100m per week in gas and electricity bills expected to filter through next year and an extra around £100m per week in road fuel costs already being spent.
Jess Ralston, Head of Energy at ECIU said:
“Yet again, events thousands of miles away are having a direct impact on the cost of living in the UK because of slow progress on electrification and so ongoing dependence on oil and gas which is priced by international markets.
“The latest volatility in these global gas and oil markets shows how exposed households and businesses remain to geopolitical shocks. Gas prices just reached a 3-year high and oil prices remain inflated too, recently reaching over $90/barrel. Bills could go up again in January if the US Iran conflict continues.
“The lesson is the same as it was during the energy crisis triggered by Russia’s invasion of Ukraine: the more reliant the UK is on gas and oil, the more vulnerable consumers are to events beyond our control. The new Prime Minister has already committed to energy bill help, but let’s be clear more drilling in the North Sea won’t bring down bills and won’t stop the basin’s output from continuing its decade-long decline.
“Reducing demand for fossil fuels through electrification, net zero technologies like rooftop and balcony solar, heat pumps and electric steel, as well as British renewables are helping to protect more households against these recurring price shocks. But we could be further along that journey, and lobbying by gas boiler manufacturers and major housebuilders has slowed the switch to electric heat pumps, leaving more homes dependent on gas to keep warm and vulnerable to the actions of Putin and Trump.”
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