Why are gas prices so high and what is happening to fuel bills?

·3 min read
Worker at natural gas plant
Worker at natural gas plant

It's thought the government will offer financial help to companies threatened by soaring energy prices.

Fuel bills are also rising for millions of households - with further "significant" increases expected next year.

What support could the government offer?

The government could provide loans worth hundreds of millions of pounds, with the Treasury said to be considering the proposals.

Business Secretary Kwasi Kwarteng has been meeting representatives of firms which rely heavily on energy - like those producing steel, ceramics or paper.

Business leaders have warned that without help some firms could be forced to close because of the steep rise in prices.

Dr Richard Leese, chair of the Energy Intensive Users Group (EIUG) told the BBC that firms had put forward "practical and sensible" measures which would not put any burden on taxpayers.

steel industry worker in front of furnace
The steel industry is particularly vulnerable to energy prices

How are energy prices affecting business?

Many companies face a considerable rise in their bills. That could mean they have to:

  • reduce or pause production - or even cease trading - which could cause job losses

  • pass their increased costs on to customers as higher prices

Energy-intensive industries are particularly exposed, but every company that has to pay energy bills - even if it's just to heat an office or shop - will be affected.

Why are gas prices so high?

There's been a worldwide squeeze on gas and energy supplies.

This has helped push up wholesale gas prices across the world. Since January, they've risen 250%.

Gas prices - chart showing sharp increase during 2021
Gas prices - chart showing sharp increase during 2021

What's happening to household gas bills?

About 15 million households have seen their energy bills rise by 12% since the beginning of the month.

This is because the energy price cap has risen. This sets the maximum price suppliers in England, Wales and Scotland can charge domestic customers on a standard - or default - tariff.

Energy regulator, Ofgem said the cap will go up again in April, the next time it is reviewed.

In Northern Ireland, there is a separate energy market with two suppliers. Prices also rise this month - by 21.8% (SSE) and 35% (Firmus).

Can I get a cheaper deal or fixed tariff?

Usually, consumers are encouraged to shop around when energy bills rise.

But at the moment better offers - including fixed deals - are simply not available.

People already on fixed deals are advised to stay put.

How can I save money on my bills?

Instead of searching for a cheaper deal, householders are being encouraged to improve the energy efficiency of their homes.

The Energy Saving Trust says that changes to our homes and habits could offset the current price rises.

How to save money on your energy bills graphic
How to save money on your energy bills graphic

Which suppliers are going bust?

Since wholesale gas prices started to spike, a number of retail energy suppliers have collapsed.

They have been unable to pay higher prices for gas, or pass all of the increased costs on to customers.

Enstroga, Igloo Energy and Symbio Energy were the latest energy suppliers to stop trading.

About 1.7 million customers have been affected.

Bust energy companies and customers affected chart
Bust energy companies and customers affected chart

Why is the UK affected particularly badly?

Gas prices are rising all across Europe, but there are extra reasons why the UK is hard hit:

  • The UK is one of Europe's biggest users of natural gas - 85% of homes use gas central heating, and it also generates a third of the country's electricity

  • Supplies of renewable energy are down because it's been the least windy summer since 1961 - over the last week, wind provided just 9% of power for England, Wales and Scotland

  • A recent fire at a National Grid site in Kent closed a power cable supplying electricity from France.

chart - the UK has much less gas storage than other European countries
chart - the UK has much less gas storage than other European countries
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