Energy price inflation

Energy price inflation

In early October, there are some concerning developments regarding energy prices this winter. Some of these we may be able to influence, while others may be outside our control. Still, we need to be aware of them.

Oil for heating increased by about 35% (OPEC*). On the other hand, petrol and Diesel fell by about 30% between 2013 and 2016. Now back at prices last seen in 2014. This is important because most of us need to account for these inflationary pressures. Moreover, in recent times, supply and demand have created irrational hoarding and a further uplift in prices, mainly stemming from delivery driver shortages.

Gas wholesale prices rose from under 50p per therm**  in March 2021 to 83p in July (OFGEM – the energy regulator for Great Britain) and recently has increased further since European supplies have significantly reduced. As the UK has a price cap, some smaller gas suppliers were selling at a loss, resulting in many ceasing to trade. OFGEM transferred customers without a supplier to larger providers, thus reducing competition.

Weather has been less warm in parts of the UK this summer, while other world areas have experienced 50C temperatures and damaging fires. Some experts predict a colder than usual Winter (Express).

Electricity charges combine renewable generation (Solar, Wind, Hydro and Tidal) with Nuclear and fossil fuels. Distribution and maintenance make up the retail prices that, according to the ONS#, has generally reduced since 2019. Some homes generate a significant proportion of their energy from solar and micro wind generators.

The UK still relies on Europe at times of peak demand for oil, gas, and electricity. Some influential countries affect supply lines when it suits them.

Actions: Reducing energy consumption can be an effective way to reduce costs. Buying when supply is plentiful can have a lasting impact on contract prices. So getting on a low tariff and reducing consumption is an excellent way to manage your energy budget. Pick providers that are financially strong and provide good service and value for money. Think about whether energy use is necessary or just a convenience.

Once energy management is under control, apply the same logic to other familiar expenditures, for example, food shopping, other utilities and entertainment. Could something be repaired rather than replaced, or should an inefficient old favourite be replaced with something more efficient?

For longer-term financial planning, select an Independent Financial Adviser to help develop a Cash Flow monitor to help achieve your goals.

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*OPEC Organisation of the Petroleum Exporting Countries

**The correct unit of measurement is a Therm – a term that the regulator uses to make price comparison simple.

#Office for National Statistics