Gas prices have been soaring in the UK and Europe this year, and do not look like slowing down.
Prices shot up by 37 per cent in a single day on Wednesday 6 October, reaching a record high of 407p a therm (100,000 British thermal units).
However, they dipped back to around 231p a therm after Russian president Vladimir Putin said his country was prepared to increase supply through state-backed exporter Gazprom.
This 231p rate is still well above typical levels of around 50p we have become used to in recent years.
But why are gas prices so high right now? Here is what you need to know.
Why are gas prices so high?
The simple reasoning is that demand is increasing again as the economy rebounds from the pandemic, while supply has been drying up.
A cold winter last year left stocks in Europe unusually low, while Russian pipeline gas supplies have also been lower than expected.
Asia also suffered a cold winter, so has been competing to import liquefied natural gas.
The increased demand has pushed prices up not just in the UK, but across Europe and Asia.
Wholesale gas prices have risen by more than 250 per cent since January, and more than 70 per cent since August alone.
How will this affect my bills?
The energy price cap – the maximum level energy companies are allowed to charge households on standard tariffs – is to remain in place through the winter, the Government has said.
However, it looks likely to rise the next time Ofgem reviews it, which could see household energy bills increase by more than £400 a year.
The dual fuel energy bill of the average household on a standard tariff looks set to increase by about 33 per cent, or £421, to £1,698 a year from next April, according to Samuel Tombs, one of the UK’s leading economic forecasters.
This energy bill increase would come on top of the £139 a year cap rise introduced after the latest Ofgem review this month
Gas still generates about 40 per cent of the UK’s electricity, meaning the price of electricity is now more than five times higher than it was a year ago.
The rise in gas prices has already caused a number of smaller energy companies to go out of business, including Avro, Green, Igloo, Utility Point, People’s Energy, PfP Energy and MoneyPlus Energy.
A spokesperson for the Department for Business, Energy and Industrial Strategy, said: “The Business Secretary has been in regular contact with Ofgem, and has been engaging with leading and smaller energy suppliers to understand the challenges they currently face, and to explore ways to ensure we best protect consumers.”
“The Energy Price Cap will remain in place to protect millions of customers from sudden increases in global gas prices. When suppliers do cease trading, we have a clear, well-rehearsed process in place to make sure customers are protected and supply is not interrupted.”