Trying to predict the future of energy prices is extremely difficult, and as COVID-19 has taught us all, we never know what’s around the corner! A whole variety of factors come into play here, particularly the impact of COVID-19. That’s why in this article, we’ll help you understand why energy prices increase and what the future has in store for energy prices so you can be prepared as possible in these very uncertain times.
In the UK, energy suppliers compete on both price and services to gain more customers than their rivals. Here at Rix, we pride ourselves on providing our customers with the very best services and oil prices available on the market.
Energy prices can increase for a number of reasons, including:
For more information on the range of factors that can impact oil prices, check out our latest blog post.
The price of both oil and gas is likely to continue going down until the end of lockdown and the global economy begins to gradually recover and come back to life.
With the pandemic being on the rise once again, Chinese manufacturing has plummeted as a result of the millions of factory workers being in quarantine and reduced demand for oil and gas. This has significantly impacted the rest of the world and the future of energy prices as China is a major oil producer.
According to the BBC, the pressure put on oil prices by the coronavirus has led to a global oversupply of oil. This pressure has resulted in energy prices to reach the lowest level in 20 years. And with the fresh announcement of a month’s lockdown measures for the UK until December, oil prices have reduced another 4% due to further decreases in demand.
US crude oil has particularly suffered from a massive hit as prices fell below $0 as storage facilities were overwhelmed. This even forced oil producers to pay buyers to take barrels off their hands.
Answers to pressing questions such as how damaging the coronavirus has been to the global economy, and as a result, the future of energy prices, and how long it will last are still unclear. However, the crisis is rapidly rising in the UK, with 27,900 new cases a day in England, according to the BBC. And because of these figures, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies have drastically reduced their production per day to prevent oil prices falling any further.
Ofgem Price Cap
Ofgem, the industry regulator, provides transparency and clarity in the way UK competitors price their energy services. Ofgem also ensures the market remains competitive so consumers achieve the fairest prices possible.
In October 2020, Ofgem reduced the energy price cap by £84 to £1,042, which is the lowest it’s ever been. The cap is a rate that is set by Ofgem every year to control the limit on the unit rate that energy suppliers charge.
Ofgem has recently put in place new rules which affect the future of energy prices. These rules protect UK households through the coronavirus crisis by agreeing to an energy price cap for 2020 and beyond. This ensures that all customers in the UK are treated fairly through these difficult times and prevents people from paying too much on their bills.
These new rules will particularly protect vulnerable households during the pandemic as anyone unable to pay their winter energy bills will be provided with additional help from their suppliers. Energy suppliers will be required to offer customers more realistic repayment plans if they are struggling with any debt. This will prevent households from being left without any heating in the winter when the coronavirus takes a further toll on the UK’s economy.
We’ll likely see energy price increases in 2021. This is because Ofgem has also stated that the oil price cap may need to rise in April 2021 to reflect a recovery in energy market prices. The energy price increases will allow energy suppliers to cover their costs and make up for the high levels of energy customers that’ve been unable to pay their bills due to the coronavirus.
With all the economic uncertainty caused by the coronavirus, we realise that many people are seeking ways to save money. Thankfully, Rix can provide you with excellent quality maintenance checks and services that will save you money in preparation for potential energy price increases in 2021. We provide an exclusive Rix Anti-Bug Treatment that’ll prevent any heavy repair costs in the long run by killing any microbiological growth that can cause damage to your tank.
Here at Rix, as we are a market leader we are able to provide competitive prices and trustworthy services to meet our customer’s needs, regardless of what state the economic climate the UK is in. Therefore, if you have an enquiry about our domestic, agricultural or commercial oil services, contact our local depot where a member of our friendly team will assist you in any way that they can.