Energy bills could reach £3,000 as oil and gas prices soar

UK energy bills could reach as high as £3,000 a year as oil and gas prices surge amid the Ukraine conflict, the energy industry has said.

Russia's invasion of Ukraine has made the trading, banking and shipping sectors reluctant to buy Russian commodities, pushing up prices.

The price of Brent crude oil rose above $119 a barrel to the highest since May 2012, while gas prices rose as well.

Average UK petrol prices have also hit a new record.

The RAC said petrol reached £1.52 a litre for the first time, while diesel rose to a high of 155.79p.

Russian oil and gas exports are exempted from Western sanctions for now, but the prospect of further action by the US and the EU is stifling Russian trade.

Emma Pinchbeck, the chief executive of the energy industry body Energy UK, said: "It's a really worrying time for both customers and industry.

"We've been saying since the autumn that we'd expect bills to go up again in October. With what we're seeing in Ukraine and in the oil and gas markets, we're now expecting those to go up further."

She said that if oil prices remain at elevated levels "you can expect bills to be anywhere between £2,500 and £3,000 in October depending on the tariffs people have and what happens in the market".

The prices that people pay for energy and fuel depend on wholesale markets, which can go down as well as up.

But average UK household energy bills are already set to rise to around £2,000 in April when the price cap is increased.

Gas prices had hit record highs last year due to colder winters which put pressure on supplies and reduced the amount of reserves countries had stored up.

Ms Pinchbeck said: "We have been saying for a long time this is an enduring crisis on the gas price and now that's being exacerbated by what's happening in Ukraine."

The RAC also warned that high fuel prices could be here to stay.

RAC spokesman Simon Williams, said: "What drivers pay at the pumps in the UK is determined by the cost of oil and the exchange rate as fuel, like oil, is traded in dollars."

He said with oil prices rising and the value of the pound at $1.33 "further price rises are inevitable in the coming days and weeks".

Brent crude rose as a high as $119.84 a barrel at one point on Thursday, before sliding back to about $112.

Meanwhile, European stock markets slipped as the Russian invasion continued.

The UK's FTSE 100 share index closed down 2.5%, while the main markets in France and Germany ended down 1.8% and 2.1% respectively.

Energy companies are sending emails to customers right now warning of price rises to hit in April - but these are a frozen picture.

Bills are massively increasing as the price cap is going up by more than 50% and it is starting to feel real now, as people are now being told how much their individual direct debits will increase by.

But those increases don't take account of what is currently taking place in Ukraine.

The price cap is been raised every six month which means there is a half-year lag in protecting customers from immediate fluctuations on the global gas and oil markets.

There was such huge pressure on the government to step in and act ahead of April's increase that they announced a package of extra help for households this time.

It's not until the next price cap rise in October that we will feel the impact of the gas and oil spikes going on right now.

The government will be under more pressure to help customers, and while for many households another energy price rise is unthinkable, there also seems to be a growing acceptance among consumers that the 'Putin Penalty' is one we will all have to shoulder to some extent.

A government spokesperson said: "It is hard to predict what longer term impacts the current situation in Ukraine will have on energy costs.

"However, the energy price cap will continue to insulate millions of customers from volatile global gas prices."

Neil Wilson, chief market analyst at Markets.com, said oil traders were acting as though Russian energy exports had already been sanctioned, and were looking for other sources of oil.

"Self-sanctions are already playing a big role," he said. "Shell, BP, Chevron are all exiting but traders and customers are swerving Russian oil without any sanctions needed."

"European gas prices hit a record this morning. Coal prices are through the roof too," he said, adding there was "nowhere to hide for European consumers about to get hit by a mega electricity bill and soaring inflation."

Energy prices are pushing up the cost of living in the UK.

The UK rate of inflation - which shows the cost of living - rose at a 30-year high of 5.5% in January and is expected to rise above 7% once the new energy price cap is introduced in the spring.

Russia is the second biggest exporter of crude oil, and is also the world's largest natural gas exporter.

Oil cartel Opec decided not to increase production further than already planned at a meeting on Wednesday, despite US calls to pump more oil.

Ukraine and Russia are also two of the world's largest wheat producers, and account for nearly a third of global exports.

Exports from the Black Sea have nearly halted amid the invasion of Ukraine and sanctions.

Wheat prices jumped earlier in the week, but fell back on Thursday.