Today’s significant rise in the price of wholesale gas has once again sent predictions for the Winter Default Tariff Cap rocketing upwards, with Cornwall Insight now predicting the cap will rise in October to over £2,900 a year for an average user.
The price cap has been extremely volatile over the past week, as the invasion of the Ukraine by Russia continues to see the European gas market in turmoil. Since Wednesday of last week price cap predictions have risen by nearly £400 for the Winter and we are now also seeing the Summer cap predictions coming in at over £2,000 for the first time.
Figure 1: Cornwall Insight default tariff cap forecasts
Source: Cornwall Insight
Dr Craig Lowrey, Senior Consultant at Cornwall Insight said:
“Following the catastrophic events in the Ukraine and the subsequent supply concerns across Europe, wholesale prices have been extremely volatile. On Friday we saw our energy price predictions fall by over £200, only for them to rocket to the record levels we see today.
“With the response of countries and companies to the actions of Russia changing almost hourly, there is no doubt these peaks and troughs are set to continue at least in the short-term. The UK government will need to be ready with ways to mitigate the impact on consumers, with an increase in financial support to households likely to be a necessity, in addition to renewed considerations on support to business customers.
“In the longer term, the UK and other governments across Europe will need to weigh up their options for future gas supply. It is likely that many will look to fast-track their renewable projects and balance their reliance on imports from Russia and potentially other nations, to avoid unstable international geopolitical situations continuing to destabilise their energy prices.”
