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Rising energy costs
Global Concerns Over Rising Energy Costs

According to a major recent survey, approximately 22 million households in the UK have experienced an increase in their energy bills since the start of 2006. Recently, there have been more price hikes by most of the major energy suppliers in the UK, and rising energy costs have been at the forefront of global concerns. This is bleak news for energy customers everywhere who are already struggling to pay their bills.

Why are energy prices rising so drastically?

The global concerns over rising energy costs have been blamed on huge increases in the cost of wholesale gas, which is the price that utility companies pay for supplies to farm out to customers. Since 2003, the cost of wholesale gas has effectively trebled. Many of the major energy suppliers have passed on these rising energy costs to their customers by claiming that they have absorbed as much of these extra costs as possible.

A major worry for energy consumers everywhere is that rising energy costs are expected to keep increasing over the next few years. The UK is not the only country to be affected by rising energy costs. Rising energy costs are a global concern affecting countries including France and Germany who are suffering the same fate in having to increase tariffs for their energy customers.

In the UK, rising energy costs are set to continue mainly because of the depletion of the North Sea and Irish Sea gas reserves. Many energy companies are now having to import more supplies to keep up with demand.

Another factor is the huge surge in prices of crude oil, which is pushing rising energy costs even higher. According to the Energy Information Centre, the situation has deteriorated to such an extent that the UK, which has so far been a net exporter of gas and oil, has instead become a net importer for first time since North Sea oil was discovered in the 1970s.

This unfortunately means that UK energy suppliers will be forced to bid for energy sources on global markets. This is bad news for energy suppliers as it means a growing dependency on overseas suppliers. Equally, this is bad news for customers as it will probably mean continued rising energy costs.

What does the future hold for energy supplies?

The trend we see today around global concerns for rising energy costs does not seem to be a situation that is going to go away any time soon. It has been forecasted that by 2015, 75% of the UK's gas requirements will need to be imported.

The biggest challenge faced by energy companies is getting the gas supplies into the UK and storing it. There is a general fear in the market that there is not going to be enough to supply businesses and households in the UK in the near future. Any rise in gas prices has an impact on the UK's wholesale electricity market as around a third of the UK's power is generated by gas.

There is some hope that rising energy costs can be controlled. Some companies have been working on the following to stop the prices from spiralling out of control:

  • negotiating hard to secure long term import deals to bring in gas from abroad.

  • working on getting supplies from new pipelines, for example from Norway and the Netherlands.

  • buying liquified natural gas from Egypt.

  • investing billions to secure new gas and electricity sources.

This global concern of rising energy costs will hopefully be helped by the Climate Change Bill which aims to balance environmental and energy concerns.

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