Utility Bidder Energy Insights 2022 - Flipbook - Page 5
A quick synopsis of the
Why are energy prices so high?
The chain of events begins with
– worldwide demand, geo-politics, Brexit, the domestic cap and even the weather
the pandemic, and the fall in
have created a perfect storm which means that every business (and home) in the UK
wholesale energy prices that
is facing increased energy prices. At the end of 2021 prices reacted badly to several
market changes which led to many suppliers being uncertain of how to trade.
came with it.
As Covid-19 hit, gas and
Since then, for the suppliers that survived, reactive pricing has been the norm
electricity use fell suddenly
- retracting prices without warning, taking time to reissue and generally being
around the world, and when
cautious about taking on new business. It’s been a chaotic time within the energy
met with overproduction from
industry and unfortunately, the end customer is feeling the brunt of this. Some
oil and gas companies, prices
unfortunately, lost their energy supplier completely and were moved to an
There is not one single reason that can be attributed to the rise in energy prices
alternative provider that may not have been suitable for their business. It’s an
As gas supply fell and demand
unprecedented market and we want to help you navigate your way through it.
started recovering, wholesale
prices began to rise. These rises
continued past pre-pandemic
prices, reaching a new high level
in the last few weeks.
Going from record-lows to
record-highs has led forward
contracts to almost double in
Pandemic surge in demand
Recovery from the pandemic has seen a huge demand for energy and this has
driven up the prices for oil, gas, and coal while the manufacturing powerhouse that
is China has been looking for more gas than ever. In addition, other Asian nations
have bought up enormous quantities of liquefied natural gas (LNG) to transition
their energy supply from coal to gas.
price over the past year.
The price cap, which comes
into effect on 1st April, will be
increasing by 54% which results
in the average household yearly
According to McKinsey & Company, China imported 27% more LNG in the first half
of 2021 than it did in the same period of 2020. That’s LNG that GB would usually
purchase – but it’s not available and you will appreciate how the law of supply and
demand impacts on price!
energy bills to increase by £693.
UK gas prices - Forward delivery contracts
Pence Per Therm
Source: Ofgem, the ICE
An increase from 50p per therm to highs of 325p towards the end of 2021