Tweet
Britain's energy companies came under pressure yesterday to reduce annual gas bills by about £100 a household as a result of falls in the price of wholesale gas.
The founder of the price-comparison website TheEnergyShop.com, Joe Malinowski, said there was a "clear case" for domestic bills to come down in February, after a 50% drop in oil prices since July. The wholesale gas market closely follows moves in world oil prices.
Other figures published yesterday showed that factory output prices fell at the fastest pace on record last month, mainly thanks to the drop in oil prices. A reduction in factory prices should lead to a sharp drop in inflation, paving the way for another rate cut by the Bank of England.
Malinowski said wholesale gas and electricity prices were down 33% and 28% respectively from their peaks this year, and this meant consumers could look forward to lower bills.
"Falls in global energy prices have taken UK wholesale gas and electricity back to a level that finally indicates cuts in domestic energy bills are on the cards. At current wholesale prices we can look forward to standard energy bills around £100 lower in the spring of 2009 compared with current levels," he said. Since the start of 2008, average domestic energy bills have risen by £370 a year.
The increase has been predicted to push an extra million people into fuel poverty. It was also a major contributor in the rate of inflation moving to a record high of 5.2% in September.
So far energy companies have resisted calls for lower bills, arguing it was too soon to bring down prices. The Energy Retail Association said: "Energy companies need to ensure there is a supply of gas and electricity throughout the year ... this is why energy companies buy gas for customers through long- and short-term contracts. The different lengths of contract mean that there is a time lag between ... when we see our household bills rise or fall."
Petrol prices have fallen dramatically over the past few days. Alistair Darling, the chancellor, has called on retailers to pass on in full the drop in wholesale oil prices, and could exert similar pressure on energy companies to reduce fuel bills.
Malinowski said: "In October we concluded that, although wholesale energy prices had come down from their highs, they had not come down sufficiently to warrant a cut in gas bills and, at that time, wholesale power prices were still pointing towards an increase in electricity bills of around 10%. Over the past four weeks the picture has changed for the better."
Big falls in inflation were presaged by the drop in factory prices yesterday. The Office for National Statistics said producer prices fell 1% in October from the month before, the biggest fall since records were first kept in 1986. This dragged down the annual rate of increase to 6.8% from 8.5% in September and a record 9.9% in July. The new figure is the lowest since March.
The fall in firms' costs was more dramatic: they were down by a record 5.6% in October as oil prices dropped nearly a fifth. The annual input price inflation for manufacturers dropped to 13.8% from 24% as oil, fuel and metal prices fell further from peaks reached earlier in the year.
The cost of crude oil, one of the main reasons for the global rise in inflation, fell by 19.5% in October - the sharpest monthly drop since December 2000, the ONS said. Oil prices were about $64 a barrel for US light crude yesterday, less than half the peak of $148 in July.
Many experts expect prices to fall further as the world's big economies, including Britain, tip into recession.
"The producer price data is eye-opening," said Howard Archer, an economist at IHS Global Insight. "Producer output and input prices fell much more sharply than expected in October, adding to the now rapidly growing evidence that inflationary pressures are waning appreciably."
Although overall consumer price inflation is at a high of 5.2%, it is expected to follow producer prices and fall rapidly, possibly to below the Bank of England's 2% target. This prompted last week's unprecedented interest rate cut from the Bank's monetary policy committee.
Economists expect more cuts to come. Hetal Mehta, economic adviser to the Ernst & Young Item club, said: "Although the Bank has cut interest rates to 3%, it has room to cut rates further."
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
