Why have gas prices gone up?

GAS prices have rocketed this year, pushing many energy firms to the brink in what's been dubbed a 'national crisis'.

Problems continue across the energy market, as 26 providers have collapsed so far this year and households face their bills doubling to more than £2,000.

Households are forking out hundreds more than they have had to before to foot their energy bills.

According latest estimates, the average bill will reach an eye-watering £2,000 by spring.

Already 26 energy firms have collapsed this year, and there are fears another six could cease trading before then end of 2021.

Energy firms have branded the situation a "national crisis" and called on the Government to help.

EDF managing director Philippe Commaret said: "The situation is critical this winter and unfortunately this is only the beginning."

It's all because gas prices have shot up more than 250% since the beginning of the year.

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Wholesale energy costs hit 470p per therm last week, creating havoc for suppliers.

It's almost a TENFOLD increase from February when prices were 48p per therm.

We explain why that was the case and how it continues affects you as a result.

Why have gas prices gone up?

Post pandemic demand and lack of supply was being blamed for the rise in costs.

High demand from Asia, low supply from Russia, a fire affecting imported French electricity, and a lack of wind for wind turbines have all added to the problem too.

The UK also imports more than two-thirds of its gas which is subject to global price swings making prices more volatile and likely to rise.

The average wholesale gas price hit 470p per therm in December, up from 48.29pin February. 

That is passed on to households through rising energy bills as wholesale gas accounts for around half of your energy bill.

The rest is made up of operating, admin and policy costs and VAT, but these will always be added on top of whatever the wholesale costs is to start with. 

We've also explained four charts that show why gas prices are rising previously too.

Will it get worse?

Consumer energy bills could also rise even further and it is now expected that the energy price cap will be increase TWICE next year, in April and October.

Consultancy firm Cornwall Insight said the default tariff price cap could hit £1,865 by April, and an eye-watering £2,240 by October

There are even concerns the cap could be reviewed more often, meaning households bills would rise more frequently in line with new raised caps.

Major energy firms like EON have called for the government to scrap green levies as a way to ease pressure on the industry.

But the result of this will either mean more energy firms collapse if nothing is done to reduce pressures, or consumers will have to keep forking out to cover the costs passed to them by an increased cap.

The government could potentially intervene by reducing or suspending VAT on bills, offering support for vulnerable customers, transferring policy costs into general taxation, and spreading the costs of supplier failures.

Who's been affected by the rising gas costs?

Rising gas prices have a knock-on effect on other energy sources too.

Natural gas is used to produce around a third of the UK’s electricity supply for households and more across the country. 

Currently suppliers are having to absorb the rising costs, because they can't pass them on to customers who are already locked in to a fixed tariff.

But that means households could see their bills rocket once their current deals comes to end, or if their provider goes under and they're moved to a new supplier, which will not have to honour their current deal.

Already this year, some 26 energy firms supplying an estimated 1.8million households have gone bust.

Among those failed firms, are Utility Point and People's Energy, and Green and Avro, and Bulb, the sixth largest supplier in the country.

Bulb is now going through a special administration process – which means it will be allowed to operate as normal and customers don't need to do anything.

Some experts have predicted that a total of 60 suppliers could go bust by the end of the year, which would leave just 10 suppliers in the market.

But other industries have also suffered as a result, with the food sector being one of those.

The rocketing gas prices forced carbon dioxide (CO2) processing plants to shut meaning supermarket meat and frozen food supplies were at risk of being hit as well.

Plus supply of fizzy drinks, draught beer and more were all affected as a result of the ongoing crisis a few months back.

Is there any way to cut down my hiked bills at home?

Those on a fixed tariff are urged not to switch provider or risk seeing their bills rocket.

If your provider collapses and you're moved elsewhere, experts are suggesting you stay on the variable rate for now as it's hoped that prices may ease off again next year, so you don't want to lock in to an expensive deal only to see costs reduce.

There are also ways struggling Brits can lower their own costs, with winter schemes designed to shave money off your energy bills.

These include things like warm home discount scheme and winter fuel payments as well as the cold weather payment scheme.

But if you happen to be affected by the collapse of certain energy companies we also have advice on what to do next.

But you shouldn't rush into switching provider, which is usually the first port of call when looking to save some pennies on your your tariff.

Lisa Barber, Which? home products and service editor, said:"Ofgem will appoint new energy suppliers to take over and protect any credit customers have so they can be reassured they won't be cut off or lose their money.

"We'd recommend taking a meter reading as soon as possible to ensure the transition is as smooth as it can be."

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