The surge in gas prices, seen most acutely in recent weeks but rising throughout the year, will have inevitable impacts for businesses and households.

There are several issues behind the spike in prices. A colder winter in 2021 in Asia means countries have had to replenish depleted reserves, as well as countries including China buying additional stock for the coming winter with an increasing switch from coal to gas to generate energy. Greater demand in South America due to lower hydroelectric production, and reduced gas exports from Russia, both played a part in reducing available supplies. Europe has also produced less gas due to the ongoing problems of the pandemic and its effect on workforce.

All this has seen gas prices surge by 70% since August, having already risen during the year. While households are protected from the direct impact of this hike by the government’s energy price cap, businesses are not.

While serious, these issues should abate once gas levels return to normal, especially if we pass through the winter without another event like the Beast from the East. But longer term, it does show we will continue to be impacted by volatility in global markets, unless we take steps now to make our energy supply more self-sufficient.

Green energy is the natural way to do this (no pun intended). The more we can shift towards sustainable, renewable energy, including replacing our nuclear fleet, the better. But the government needs to give serious consideration to the way in which to help consumers meet the cost of the move towards renewable. At present, all of the cost of renewable energy support is loaded onto electricity prices, whereas none is added to gas prices, despite Government plans to increase electrification and eliminate reliance on fossil fuels for energy by 2035. If we are to encourage people to move towards greener electricity, this balance will need to be reassessed.

But the costs facing consumers are not solely affected by the price of energy. The more energy efficient we can make our homes, the less energy we require to heat and power them, and the cheaper our bills will be. 

In our report on Energy Efficiency of Existing Homes, the Environmental Audit Committee called for the government to frontload investment into improving energy efficiency in homes, especially for social housing, and to create a proper system for installing energy efficiency measures – unlike the unfortunate  Green Homes Grant scheme, which was an administrative nightmare for installers and consumers alike.

The current spike in prices is short-term, but reflects a need for a long term policy into energy mix, with appropriate government investment to back it up.