Russia's invasion of Ukraine could see energy bills reach £3,000 as petrol prices hit record high

Could energy bills reach £3,000 a year for UK households in the wake of Russia's invasion of Ukraine? NimbleFins takes a look.
Gas price rises

UK energy bills could rise as high as £3,000 a year due, in part, to Russia's invasion into Ukraine.

The energy price cap, which affects gas and electricity bills, has already surged by 54% this year from £1,277 to £1,971, with the rise taking effect in April. As a consequence, electricity prices have risen around 50%.

There were already fears of another huge rise when the cap is revised again in August. But Russia's war with Ukraine has made this almost certain as Europe tries to cut off President Putin's economy.

Russia is one of the biggest natural gas exporters in the world and Europe is heavily reliant on its supplies.

The EU gets about 40% of its gas from Russia, according to the Wall Street Journal.

And while the UK only gets about 5% of its supplies from Russia, the UK's market is closely connected to mainland Europe. Higher prices in Europe usually impact the UK's prices too. This year’s large price cap surge is largely down to higher demand in Europe during a colder than average winter in 2020/21.

While Russian sanctions so far have not hit the country’s energy suppliers, the US and UK are pushing Europe to reduce its reliance on Russian gas and oil.

Emma Pinchbeck, chief executive of energy industry body Energy UK, told BBC News: "It's a really worrying time for both customers and industry.

"We've been saying since the autumn that we'd expect bills to go up again in October. With what we're seeing in Ukraine and in the oil and gas markets, we're now expecting those to go up further."

She said if oil prices stay as high as they are, "you can expect bills to be anywhere between £2,500 and £3,000 in October depending on the tariffs people have and what happens in the market".

Earlier this month the US said Russia's oil and gas exports were "on the table" in sanctions discussions.

The UK’s Foreign Secretary Liz Truss said: “I would support the idea of having ceilings on how much oil and gas is imported from Russia.”

And Prime Minister Boris Johnson said Europe needed to cut down its reliance on Russia's natural gas supplies.

He told MPs: "I think the key thing is to get people first of all to recognise the scale of that dependency, as in any addiction.

"That's what we're doing and the UK Government has been making that point the whole time to our friends because it's got worse since 2014.

"But what we're also doing is helping countries for instance, in the Baltic states to go further and faster with renewable technology."

Suffolk County Council is taking matters into its own hands and trying to terminate its £10 million-a-year contract with Russian state-owned supplier Gazprom.

Meanwhile Russia is the third largest oil producer in the world, but it has "become toxic" on the markets. About 70% of the country's crude was "struggling to find buyers", the FT reported.

Brent crude oil has surged way over $100 a barrel in March.

This is already having an impact on domestic oil prices. There are about 1.5 million UK households that heat their homes with oil. And oil prices have soared from about 45p a litre in September 2021 to 113p a litre on March 5.

John Kilduff, partner at Again Capital, told CNBC: “Oil from Russia will be foreclosed from the global market here at some point and we are already seeing commercial activity reduced, particularly as it relates to Russia exports via maritime assets and that is already hitting the market.

“These are barrels that we cannot make up, so that’s why this market is on tenterhooks.”

The cost of living nightmare is also continuing at the petrol pumps, with fuel hitting record highs since Russia's invasion.

The average price of petrol jumped to £1.51 a litre at the end of February, with diesel hitting £1.55, according to the RAC.

This compares to 122.5p a litre for petrol a year ago, and 125.99p for diesel.

The Government maintains the energy price cap - which restricts how much a company can charge a customer not on a fixed rate—is enough to help Britons.

A spokesperson said: "It is hard to predict what longer term impacts the current situation in Ukraine will have on energy costs.

"However, the energy price cap will continue to insulate millions of customers from volatile global gas prices."

Read our article on 11 ways to save energy in the home.

Erin Yurday

Erin Yurday is the Founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.


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