Centrica, Britain’s biggest domestic energy supplier, warned today that the average annual gas bill could jump from £600 to more than £1,000 by the start of the next decade, as customers are forced to stump up for the soaring cost of oil and gas. So we’re looking at an increase of at least 70% – and there’s some speculation today that the actual hike could end up being even bigger than this. You may have thought your gas bills were already going through the roof - turns out we ain't seen nothin' yet...
The problem, of course, is that commercial gas contracts are linked to the price of oil – and although black gold has slipped back below $130/ barrel in the last few days, it’s still twice as expensive as it was a year ago. And with our North Sea oil running out fast, we’re getting ever more dependent on imports, and thus ever more exposed to the fluctuations of the oil price. In 2004, we had enough gas to cover all our energy needs – by 2015, 75% of our gas is likely to be bought in.
Centrica, which this week snapped up some Norwegian gas fields (it wants to acquire more upstream assets to gain greater control of its destiny), is not the only gas supplier to be feeling the heat from rising oil prices. All of the main UK suppliers have already started putting up prices, and they’ve warned that further hikes are likely to follow.
The suppliers will argue that there’s nothing much they can do about all this – as their costs spiral, they have to pass this on to customers eventually. But the fact remains that according to some estimates, hikes of this magnitude could leave over 6m people in fuel poverty – i.e. spending more than 10% of their household income on energy bills. This means that firms like Centrica are likely to come under pressure from Government to try and reduce bills for low-income families.
However, Centrica Energy’s MD Jake Ulrich didn’t offer much by way of consolation this morning, arguing that prices would ‘continue rising for some time’. Now that we’re part of a global economy, ‘energy is going to become relatively much more expensive in the future,’ he said. In fact, he thinks that bills are going to increase so rapidly that consumers will be forced to change their behaviours and habits: ‘I hate to go back to the Jimmy Carter days in the US but maybe it's two jumpers instead of one,’ he’s been telling the news channels today.
Savvy entrepreneurs will be planning their new arran knitwear business even as we speak...
In today's bulletin:
Centrica predicts rocketing prices
John Lewis tells retail of cheer
The older the better for UK employers
Leadership Week: MT meets Shaa Wasmund
Lessons in delivering the goods, from YouTube