How much have energy prices risen in the UK since the beginning of April?
What is the inflation rate in the UK?
What do economists predict about the British inflation rate?
What are the consequences of rising energy prices for British steel mills?
British energy companies say between 30 and 40 per cent of the population will fall into fuel poverty as prices rise again in October, and a terrible winter awaits them.
Fuel Poverty in Britain
The heads of the British energy companies have told the British Parliament that 4 out of 10 people in the UK will go into fuel poverty by raising prices again in October. They are calling for more government support for vulnerable families who will face a terrible winter. Michael Lewis, the chief executive of E.ON UK, said between 30 and 40 per cent of the population has been living in fuel poverty since October, when the annual price cap was increased. He said the situation is expected to have a significant impact on consumers. Consumer debt is up by 50% to £800m ($1.04 billion).
The British Are Worried About Fuel Costs
Keith Anderson, Scottish Power chief executive, also said he had about 8,000 calls from consumers worried about their reduced ability to pay for fuel. He said he was very concerned about families who would face an increase in their energy bills and would have a hard time paying for it. He called for a government fund to remove £1,000 off bills for the country’s poor families in October, which would then be repaid within 10 years.
Rising Energy Prices in Recent Months
Global energy prices have been rising for the past six months, but the West’s economic war with Moscow has made things worse. UK is cooperating with the US and the EU in imposing sanctions on Russia, a major energy supplier to Europe. Western nations have pledged to halt coal imports from Russia by the end of this year, and to reduce oil and natural gas imports from the country to zero in the coming years. Gas prices have risen sharply in the UK in recent months, forcing energy suppliers to raise bills. But some consumers have accused these suppliers of raising prices too high to boost their balance sheets at the expense of consumers.
UK Inflation at its Highest Level in 30 Years
The Office for National Statistics (ONS) says rising fuel prices and energy costs have pushed the country’s annual inflation rate to 7%, the highest in 30 years. Annual inflation rose 7% in March, the highest level since 1992. According to the ONS, the biggest reasons for this increase in inflation have been rising fuel prices and energy costs. The UK consumer price index rose by 6.2% in February, a year earlier than expected. Economists, meanwhile, had forecast inflation at 6.7%. But this 7% inflation represents the highest figure in the last 30 years.
UK Energy Prices Increase by 54%
Rising energy prices, especially global gas prices, have pushed energy prices in the UK up by
British Economists Forecast Inflation
According to Boris Glass, S&P Global Ratings Senior Economist, inflation in the UK is likely to rise again and will remain at the same level throughout the year. “The elevating of the cap on family power payments will add an additional level or so by the tip of this month. The surge in inflation will hit family budgets laborious, particularly those on decreased incomes who’ve now exhausted pandemic financial savings,” he said. Glass predicts that high inflation will decline from the beginning of next winter, if global energy prices do not rise further.
Some British Factories Shut Down Due to Rising Energy Prices
Seventeen per cent of British energy companies have shut down since the beginning of this year due to rising gas and electricity prices, and the crisis in Ukraine will make the situation worse. High energy prices have forced some British manufacturers to stop production. The shutdowns are expected to widen in the event of a severe shortage of natural gas due to the Ukraine crisis. Gas prices have increased 59 times since May 2020, and oil prices have reached their highest level in seven years. Therefore, continued production is costly for factories. Russia’s invasion of Ukraine has exacerbated the situation, boosted energy prices and reduced the supply of essential components. European automakers have closed their factories in recent days due to a shortage of parts.
Mill Closures
British steel plants have been temporarily shut down to deal with volatile energy prices. Factories that use electric ovens must decide whether to continue production. Energy prices are currently 300 pounds ($396) per megawatt-hour higher than before the energy crisis. So the cost of producing a ton of steel in an electric furnace has increased by 150 pounds. Producers have raised prices and their profitability has been hurt. A survey of 132 manufacturing companies in the UK shows that 46% of them are setting up their business to reduce energy consumption, 39% have transferred high costs to customers and 11% are receiving additional funding to cover high energy costs.
75% Reduction in British Gas Production by 2030
The offshore energy industry body OGUK has said that the lack of investment to build new gas fields in the North Sea would increase the country’s vulnerability to geopolitical crises such as the recent tensions between Russia and Ukraine and rising energy prices. If new oil and gas fields are not developed in the UK, the country will become increasingly vulnerable to price shocks and geopolitical events, and its gas production will be reduced by 75% by 2030. The OGUK stated that without new investments in the construction of new gas fields in the North Sea, the country will be more vulnerable to crises such as the recent tensions between Russia and Ukraine.
A further increase in gas prices will exacerbate the current energy crisis. Gas and electricity suppliers in the UK will go bankrupt and consumers will face rising living costs due to rising energy bills. Millions of British families are falling into energy poverty, and many have to choose between the cost of food and heating.
