Britain's energy industry regulator has raised the cap on annual electricity bills to keep up with the constantly rising cost of procuring electricity. The yearly bill will be capped at £3549 from October 1. That's a whopping 178% increase since last winter and an 80% increase from the current level.
Britain's energy industry regulator has raised the cap on annual electricity bills to keep up with the constantly rising cost of procuring electricity. The yearly bill will be capped at £3549 from October 1. That's a whopping 178% increase since last winter and an 80% increase from the current level.
An increase in the UK's price cap may occur in future quarters if demand is not met with a sufficiently large supply of fuels, especially gas.
According to estimates by consulting firm Auxilione, the price cap on electricity in the UK could rise to a staggering £7272 by April 2023. At the same time, Cornwall Insight estimates that a year from now, in August, the level could reach £6616.
Natural gas is a popular source of energy in Western Europe. Despite its small share in energy mixes, it is an essential source of heat in winter for most EU countries and helps quickly supply the electric grid when power generation from other sources drops. These two reasons are most likely behind such significant increases in electricity prices following the cut in Russian gas supply.
More quarters of record profits for energy companies?
BP and Shell are the most prominent Western European petrochemical companies in the natural gas market in terms of revenue. They rank No. 2 and No. 3 globally, respectively, and are among the most important suppliers of blue fuel to Europe, especially after the reduction of its supply from the East.
In the last quarter, BP and Shell announced record results, reporting $67.9 billion (85.9% year-on-year growth) and $100.1 billion (65.3% year-on-year growth) in revenue, respectively. However, it wasn't the strong sales growth that came as the biggest surprise to investors but the net profits, which amounted to $9.3 billion and $11.5 billion, respectively, due to significantly expanded margins.
The current market situation may indicate that the excellent performance will continue in the coming months due to the record price of natural gas and the stabilization of oil prices after the recent decline. Even if the consulting firms' estimates were halfway correct, this could mean a record price for fuel supplies for power generation and household heating.
BP and Shell, which serve much of the European market, may continue to face high demand. Despite the expected drop in production in the EU market and thus industrial demand, European countries still need to stockpile plenty of gas to fill their reserves for the upcoming winter.
European energy index prices have had their strongest week of increases in 2 months. In Germany alone, electricity prices have risen by 860% over the year. Even in France (which bases 74% of its power generation on nuclear power plants), energy prices have reached an annual increase of more than 950% after it was announced that some nuclear reactors would be temporarily halted for maintenance work.
Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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