Electricity Bills Will Not Decrease
The upward march of oil prices over the past 18 months is the reason cited for the increase in energy prices. It may be intuitive to now believe that a reduction in electricity bills may be due soon, reflecting the recent dramatic drop in the price of oil, but several forces are at work for your electricity bill to remain at its dizzy heights.
The wholesale price of gas is linked to oil prices, and gas is the largest fuel type used to produce electricity in the UK. The gas used in these power stations is bought on the forward market – that is a price is agreed six to twelve months in advance for the supply of gas. High prices six to twelve months ago means high prices now for the consumer.
Energy suppliers are unable to take advantage of the current low prices as the credit crunch has reduced everyone’s liquidity and flexibility of funds, letting the opportunity to reduce your bills disappear.
The total electricity available for supply has actually decreased over the last number of years leading to a perceived lack of availability in periods of high electricity consumption, namely the winter months, leading to speculation that electricity prices could increase.
In July the Department for Business, Enterprise & Regulatory Reform (BERR) released a booklet showing the present energy trends in the UK. The past twenty years has witnessed a startling rise in the use and dependency of gas exhibited in the charts below.
Electricity Supplied by Fuel Type
A more detailed investigation on the changing fuel types used over recent years shows the real picture of the UK electricity generation market. The total electricity output has decreased in recent years, nuclear power is on the wane, and renewable energy is a long way off providing a significant contribution to the energy market.
Electricity Trend by Fuel Type
[...] Since last year oil prices have rose steadily causing energy tariffs to rise also, leading households to seek the safety of fixed term contracts to ensure future outgoings were under control. Now as oil prices are falling there is a realisation that energy tariffs will not decrease due to reasons such as forward speculation, high wholesale gas prices and reduced financial leverage due to the credit crunch – leading more households to consider a fixed term contract. Our previous posts also highlight why energy prices do not often decrease. [...]
Great post – very true..)),
Gas prices these days are just getting higher, i think the government should focus more on alternative energy.
I think it is a deliberate trick that few people know how to produce their own energy? Do big businesses stop this education to suit themselves?