Why is there an energy crisis? Reasons behind rising bills explained

Households face paying hundreds more for their energy bills starting in April as prices continue to rise.

Ofgem announced that the energy price cap will increase by 54 per cent, adding an extra £693 to the average annual bill.

But what is causing the current energy crisis and why are we paying so much more?

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Chancellor Rishi Sunak explained that rising energy costs are a global problem, not just one affecting the UK.

Here, we take a look at what’s behind the price increase.

Why are energy prices going up?

It all boils down to the fact that the wholesale price of gas has skyrocketed in recent months.

Gasoline prices are currently about four times higher than they were a year ago.

There is no single cause for price increases, but people, companies and countries in general have to compete with each other to buy gas.

During last year’s long winter, countries in Europe and Asia burned off much of their gas reserves to heat homes, while demand is also higher than usual as the world emerges from successive lockdowns and lockdowns. companies try to make up for lost time.

Meanwhile, gas production is also lower and the weather was less windy during the summer, causing more gas to be burned to generate electricity.

Between them, many of these factors have increased demand and reduced supply, a situation that will almost always lead to higher prices.

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What does the price cap do?

Ofgem’s price cap sets the maximum amount energy companies can charge their customers for each unit they provide.

Until now, Ofgem’s price cap has protected customers, as energy companies must take the hit from higher prices.

However, the limit is reviewed every six months and will be changed in April to take into account the price increase.

As of April 1, households are expected to pay much more on their energy bills to keep energy companies afloat.

Are electricity bills also affected?

Although the crisis revolves around gas, even people who live in a home without gas heating or cooking facilities will see their energy costs rise.

This is because around 40 per cent of the UK’s electricity needs are still met by burning gas in power stations.

Therefore, gas and electricity bills are likely to increase, although, of course, more gas bills.

When will the situation improve?

That depends on a few things.

Fortunately, we have experienced a much milder winter this year, so less gas has been needed to heat homes.

But many experts still think it could be years before gasoline prices fall below their high levels.

Goldman Sachs believes that gasoline prices will remain at twice their usual level until 2025.

Experts predict that bills could rise again the next time the price cap is revised, in October, to more than £2,300 a year for the typical home.

Will the situation in Ukraine affect gas prices?

On Wednesday, the United States announced that it would send 3,000 troops to Eastern Europe, where Russia and Ukraine are preparing for a possible war.

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If there is a war and the West imposes sanctions on Russia, this could push gasoline prices even higher.

The UK only gets three per cent of its gas from Russia, most of our gas is produced at home or pumped from Norway, but many European countries depend on Russia for their gas.

If supplies to Europe are somehow disrupted, this will also push prices up in the UK.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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