Gas prices: Why are they rising and will my bills get more expensive?

The issue is down to the price of wholesale gas surging by 250% since the beginning of the year and a massive 70% since last month, according to Oil & Gas UK.

Why are wholesale prices going up?

There are a number of reasons for the cost of wholesale gas surging. Boris Johnson likened the situation to the whole country “putting the kettle on at the end of a TV programme”, and insisted the price spike will just be temporary.

The Prime Minister argued that the problems can be pinned on the economy “bouncing back very strongly” as the world “wakes up from Covid”.

However, post-lockdown demand is not the only factor. Supply from Russia has dried up recently, and demand is high in Asia, which is putting pressure on international markets.

READ MORE: Government says energy security is ‘absolute priority’ amid rising gas prices

In the UK, several gas platforms in the North Sea have closed to perform maintenance that was paused during the pandemic.

In a further stroke of bad luck, cables that import electricity from France were damaged last week, and September has not been a very windy month. These problems have meant that more gas is needed to produce electricity.

Will my bills get more expensive?

The short answer is it depends. Some suppliers were already increasing prices for those on default tariffs because UK energy regulator Ofgem increased the price cap.

Other people are locked into year-long deals which fix the price for a certain period. If your contract is coming to an end you will probably have to change it for a more expensive one.

According to Ofgem, consumers can expect an average price increase of £135 over the winter.

Why are some companies now going bust?

The wholesale gas price increase is a big problem for some companies, who are effectively now selling gas to customers on fixed-price contracts for less than it costs them to buy it.

So far five energy suppliers have gone out of business in recent weeks, with some predicting that dozens more could follow before the end of the year.

Bulb, the UK Government’s sixth biggest energy company, is now seeking a bailout. The firm provides 1.7 million customers with energy but is reportedly working with financial advisers Lazard to find new sources of cash.

What should I do if my energy supplier goes bust?

Sit tight. Ofgem will move you to a new supplier. Take pictures of your meters, and download or print out your bills from the old supplier.

If Ofgem moves you to a supplier or a deal you are not happy with, you can then shop around.

If your energy supplier owes you money, your money is protected and you should get it back.

Will fewer energy suppliers mean a worse deal for households?

Probably. Price comparison websites are showing little in the way of good deals at the moment. Regardless of what wholesale prices are doing, less competition could well mean fewer good deals in future as well. However this remains to be seen.

What is the UK Government doing about all of this?

As energy is a reserved matter, dealing with the crisis is the responsibility of Westminster.

Business Secretary Kwasi Kwarteng is holding an emergency summit with gas company bosses this morning. He said smaller companies will be allowed to go bankrupt with customers auctioned off to firms able to offer them the cheapest offer.

Over the weekend, Kwarteng also had one-on-one talks with the leaders of energy firms – likened to the emergency summits with businesses at the beginning of the pandemic.

Other than energy bills, what other consequences are there from rising prices?

The cost increase has had an impact on more than households bills. The UK’s biggest fertiliser and Co2 producer had to halt production last week, while chair of the NHS Confederation Lord Adebowale has warned that operations could be cancelled.

However, one senior NHS source said the UK Government had assured them that its access to Co2 would not be impacted.

Meanwhile, meat and poultry bodies warned that abattoirs may have to stop operations as they rely on Co2 for the humane killing of animals.