An industry expert has warned against complacency over the falling wholesale gas prices of the past few weeks.
Investec analyst Martin Young cautioned that consumers are still facing sky-high energy bills next April, with even these far lower wholesale prices translating to a bill over the £2,500 average price promised by the Energy Price Guarantee.
Continuing market uncertainty following the outbreak of war in Ukraine, coupled with the economic fallout of the pandemic has resulted in soaring wholesale gas prices throughout 2022.
At the peak on 28 August month-ahead National Balancing Point contracts traded at 597p/therm, while winter-ahead contracts were selling at more than 715p/therm.
Yet mild weather in October, along with increased storage across Europe has seen prices fall by more than half, with month-ahead contracts now trading well under 200p/therm and winter-ahead contracts below 350p/therm.
Young told Utility Week that while prices have come down “on the short end of the curve”, customers are still facing consistently high bills next year as forward prices remain elevated.
“Everybody’s gotten very excited about the fact that these prices have come down. The prices are, even on the forward curves, significantly below where they were one month ago. But the forward curves one month ago were in the 450p/therm to 550p/therm range for next year. They’re still above 300p/therm through next year,” he explained.
Earlier this month chancellor Jeremy Hunt announced the government was bringing the Energy Price Guarantee to an end 18 months earlier than originally planned. The most vulnerable will instead receive more targeted support from next April
Young warned against complacency in light of falling wholesale costs, but added that he would “struggle to imagine” any consumer is going to feel complacent about energy prices at this point in time.
He continued: “As things stand, you are going to have a price level which is higher than £2,500 throughout next year and there is no support for you post the end of March.
“So, you need to do something. Government needs to do something, otherwise you are going to find more and more people facing very unpalatable choices and so on… I do not in any way, shape or form think that the problem has gone away.”