Millions are wondering when will energy prices go down again now that the new energy price cap is in force. It’s unlikely that UK households will see a significant drop in energy prices any time soon. Ofgem’s energy price cap has risen to £1,977 a year for average use – the highest it has ever been. Experts predict the cap could go up even more in October. This leads to continued worries over how much energy bills will cost this year.
The cost of living crisis is having such an impact on household budgets that MoneySavingExpert.com founder Martin Lewis has announced that he is “out of tools” to help people save money. He told the BBC “it’s not something money management can fix” and urged the government to act.
Households in need of help with energy bills will be keen to know when energy prices will start to fall. But unfortunately, there isn’t a straightforward answer for now.
Will energy prices go down in 2022?
Energy prices are very unlikely to go down in 2022 – in fact, they will almost definitely be going up. Russia’s invasion of Ukraine is largely to blame for this. This is because the conflict is pushing up global prices of commodities such as oil and gas.
Some analysts, including those at investment bank Investec, predict that the cap will go up to about £3,200 a year from October 2022. Ofgem will make an announcement about this in August.
When will energy bills start to go down?
Experts are split about when energy bills might start going down. Squeaky CEO, Chris Bowden thinks prices might start to fall from April 2023. But analysts at Energyhelpline.com say it could be at least October 2023 before costs fall.
Tashema Jackson, energy expert at Energyhelpline.com, says: “Trying to predict when we will see energy bills fall is a bit like searching for a needle in a haystack at the moment as there are a number of variables, including the ongoing war in Ukraine. However, our best guess is that prices will remain high for the next year. From next summer we may start to see a change in the trend for high wholesale costs.”
What happens in Ukraine – and the world’s reaction to it – is a big factor. The UK government plans to phase out Russian oil imports by the end of 2022. It might do the same for gas. Whether the EU and US will impose similar sanctions is still to be decided.
The price of oil impacts electricity prices because it’s one of the commodities used to power turbines in power stations. Global commodity prices impact how much UK consumers pay for gas and electricity.
“We’re seeing the old economic theory of supply and demand taking its revenge,” explains energy expert Chris Bowden. “It’s not clear whether new oil and gas exploration will deliver the required returns given the global push to stem climate change by decarbonising the economy. As such, many oil and gas companies are being run to generate free cash more than growth, and dwindling supply is colliding with rising demand to push up prices too, in the case of gas, historic highs.”
For more information on how much your energy bills could increase following the new price cap, use our handy calculator.
When should I look for a new energy deal?
There’s not much point in looking for a new energy deal at the moment. Experts say people are generally better off staying on their current supplier’s standard tariff. This means they will be protected by the energy price cap. Energy suppliers have mostly paused offering fixed-rate energy tariffs.
Gareth Kloet, energy expert at GoCompare.com, says: “If your fixed rate tariff has come to an end with your existing supplier, it’s very likely that your best option will be to stay on their standard variable tariff (SVT). At the moment, this will probably be the least expensive option as there aren’t any competitive tariffs available in the market that you could switch to. So by staying on your supplier’s SVT, you are protected by the price cap for another six months (until it is updated in October 2022).
“While there aren’t any competitive tariffs available at the moment, it’s still worth checking regularly as the market can change quite quickly and it may be that if things change, you can secure a better deal before October.”
When prices eventually come down, should I move to a fixed-rate or variable tariff?
Whether you choose a fixed-rate or variable tariff will depend on your circumstances. When prices come down, you should compare both types of deal to find the best option. Using a price comparison site, such as our sister brand GoCompare or ComparetheMarket, will help you find the best deal available when prices come back down.
Energy expert Tashema Jackson says: “What the market looks like, how many suppliers are in business and whether people will be best off switching to a fixed deal or staying on a variable deal are all difficult to know at the moment, but your best bet is to keep close to what is happening and then make the right choice based on your circumstances.”
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