The current energy crisis could continue for as long as another two years, according to Chris O’Shea - chief executive of British Gas owner Centrica – who told the BBC that we shouldn’t expect prices to start coming down “any time soon” and there’s “no reason” for them to do so.
Mr O’Shea believes the current state of play in the energy markets “will be here for the next 18 months to two years”. However, he did claim that concerns many have expressed about bills rising by over 50% to upwards of £2,000 may be "misplaced".
Mr O’Shea also called for more to be done to help consumers struggling with escalating costs, in particular those who will be plunged into fuel poverty.
Green energy ‘transitioning’ is also causing high prices
While we know that the economic slowdown from the pandemic and lower supplies of gas around the world has played a significant part in these rising costs, Mr O’Shea also commented on how there’s also been a notable increase in the global demand for gas as nations move towards using greener alternatives – which in turn has pushed up demand even more and sent prices skyrocketing.
"As we move towards net zero, gas is a big transition fuel. So, as you turn off coal-fired power stations in other countries, there isn't an abundance of gas that you can just turn on quickly."
However, in addition to this, Mr O’Shea expressed doubts that the situation we’re currently in could’ve been avoided or even mitigated had the UK already had its own supplies of gas, or if we had boosted supplies from the North Sea.
"I'm not sure an increase in UK supply would have brought the price down from £3 a therm, as it was in December, from 50p as it was a year ago.
"We bring gas in from the United States, from Norway, from Europe, from Qatar, from other places. So we're not in a position to simply have the UK as an isolated energy market. We are part of a global market."
Three measures that could reduce costs
When asked about what can be done to help the situation, Mr O’Shea gave the BBC three approaches the government could take to make things easier on UK households:
- Instead of adding it to our bills, defer the cost incurred by surviving suppliers from taking on customers of the many companies that have gone bust.
- Take the 5% VAT off energy.
- Move levies charged to fund a green transition from bills to general taxation.
He also added that these steps “could be enacted very quickly” and they would “take care of half the price rise”, giving scope for the government to provide extra support to those that need it the most.
Other options the government may consider
The government has given signs it will make a decision on what support it may offer UK households before the new energy price cap is unveiled on February 7th. However, this new cap is expected to increase once again and it’s not currently an option for consumers to run an energy comparison and switch tariffs - as the best energy deal around right now is the existing energy price cap, even from the country’s best energy suppliers.
Some energy companies have called for extra financial support in the form of a fund or a loan that firms in the industry can use to bring down their costs when wholesale prices are high. These would then be repaid over a longer period through customer bills, meaning we wouldn’t face such drastic price rises in the short term. However, as yet, no scheme to facilitate this has been agreed or officially put forward.
As such – and in the face of what Mr O’Shea has forecasted for the next two years – many will be hoping some form of government support is offered. In the meantime, those concerned about their energy bills may wish to check their eligibility for current schemes like the Warm Home Discount, the Winter Fuel Payment and the Cold Weather Payment.