Will falling oil prices save the consumer?

In the past week, oil prices have pulled back sharply from a high of USD147 last Friday to USD132 today. Falling oil prices have had a predictable impact on wholesale gas and electricity prices, which have also come off sharply from the highs recorded on 4 July 2008. In the past 2 weeks wholesale gas prices have dropped by 9% with electricity prices off by 7%.
 
But is that enough to save the cash-strapped consumer from another energy bill hike?
 
Unfortunately not according to analysis from energy price comparison website TheEnergyShop.com. Even after the recent pullback, wholesale gas prices are still 77% up on where they were at the beginning of 2008 with wholesale electricity prices up by 59%. To restore the balance between wholesale and retail prices, retail gas bills will have to rise by over 40% and retail electricity bills by around 25% over the next 12 months. Please note that this is not a forecast for the end of 2008. This is our expectation for the next 12 months based on where wholesale energy prices are today.
 

Wholesale Energy Prices Jul 2008

Wholesale Energy Prices Jul 2008


Wholesale v Retail Gas Prices Jul 2008

Wholesale v Retail Gas Prices Jul 2008

What we think:
 
The sell off in wholesale energy markets makes for a welcome change. It has unfortunately come too late in the day and from too high a level. Energy suppliers need to go into the market over the coming weeks and months to hedge their energy buying and the prices they are going to have to pay means another big increase in retail energy bills is unavoidable.”
 
The best we can now hope for is that, against this backdrop of falling energy costs, the energy suppliers show some restraint with their increases. Rather than one massive hike we would prefer to see a smaller increase now, say 15-20%, followed by a further increase next spring if it is still justified. That way, consumers have more time to adjust to the additional cost burden.
 
Capping or Fixing your energy tariffs has been our recommended strategy all year and still remains unchanged. Consumers must cap their bills now as the next round of price hikes could be just weeks away.

 
Best Capped/Fixed Energy Deals (18 July 2008) Payment by Monthly Direct Debit

Best Capped and Fixed Energy Prices Jul 2008

Best Capped and Fixed Energy Prices Jul 2008


Source; www.TheEnergyShop.com
The British Gas Price Guarantee 31 Dec 2009 carries a potential cancellation charge for early termination of the contract. The cancellation charges are £20 for electricity and £75 for dual fuel. The E.ON Energy Saver 3 tariff comes with a free energy monitor and carries an early exit penalty of £35. The ScottishPower Fixed Price Energy 2009 tariff is fixed until 31 August 2009 and carries an early exit penalty of £30 for electricity and £50 for dual fuel.

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