Household energy bills are expected to rise again this summer, with forecasts suggesting an increase of around £209 a year from July, as global instability continues to drive volatility in wholesale gas markets. Analysts have also warned of a potential 'payment shock' later in the year, with further pressure expected when demand rises during the colder autumn and winter months.
Cornwall Insight Forecast
Cornwall Insight said its latest prediction for Ofgem's energy price cap from July to September now stands at £1,850 for a typical dual-fuel household. That would represent a 13% increase on the current £1,641 annual cap set in April. The forecast is slightly higher than the 12% rise the consultancy predicted last month. Ofgem adjusts the price cap every three months and will confirm the next level for July to September on May 27.
Impact of Middle East Conflict
Wholesale energy prices rose sharply in February and March following US and Israeli strikes on Iran and subsequent retaliatory attacks, which damaged Gulf infrastructure and led to the closure of the Strait of Hormuz - a key route for around 20% of global oil and gas supplies. Although a temporary ceasefire eased some pressure on markets, prices remained elevated, pushing forecasts for July to more than £200 above the current energy cap.
Markets have stayed highly volatile since the escalation of the Middle East conflict, with analysts warning this instability is feeding through into higher household bills. At one stage, Cornwall Insight predicted annual energy costs could rise by as much as £332 to £1,973 from July, underlining the scale of uncertainty. They warned that while summer price increases will be noticeable, their impact on households may be softened by lower seasonal usage.
While households will be understandably frustrated by a rise during the summer, the impact will be reduced as household energy usage typically falls during the hotter months. The bigger concern is October, when demand picks up again and current forecasts point to a similar cap level as July.
Even if the conflict were to end tomorrow, the physical damage to infrastructure and lingering effects of disrupted supply mean a fall back to April's price cap levels in the autumn looks unlikely.
Expert Comments
Craig Lowrey, principal consultant at Cornwall Insight, said forecasts had shifted significantly in recent months. "Over the past few months, we've watched our forecasts shift from showing virtually no quarter-on-quarter increase to a 13% rise in current bills - with this change due to the impacts of the Middle East conflict." He added that the greater concern now lies in the autumn period. According to Lowrey, if October's cap remains similar to July's level, "that is when the Government will need to think seriously about targeted support for the most vulnerable."
Pressure on Government
Pressure is also mounting on ministers to prepare support measures ahead of winter, particularly for households already struggling with energy debt. Simon Francis, coordinator of the End Fuel Poverty Coalition, warned the situation could become severe if prices remain elevated. "If bills remain high when heating season begins, millions of households already in energy debt or struggling to keep their homes warm will face an extremely difficult winter. Households need reassurance and support, not a summer of suspense. That means the Government must act before winter to spell out what support will be available."
A Government spokesperson said the situation remained a priority and pointed to the need to reduce reliance on fossil fuels. "We know families will be concerned about the impact the conflict in the Middle East will have on their energy bills. Tackling the affordability crisis is our number one priority. The lesson of yet another fossil fuel crisis is the UK needs to get off the fossil fuel rollercoaster and on to clean, homegrown power we can control."
