Energy prices and food prices are on the rise in the UK and understandably people are worried about what the colder months will bring in terms of how much it will cost to heat their homes.
With the latest news that the UK Government will be helping households out with a payment of £400 to be put towards energy bills, we have decided to look into where the UK gets its energy from and how much it costs the country. We will also look at how much the price has risen in recent months, how much it is costing us and the best ways to reduce your monthly energy bill.
Where does the UK get its energy from?
The UK sources its energy from both inside and outside of the country. According to U-Switch, the UK has its own gas supplies and fuel reserves but the percentage of domestically sourced fuel has decreased.
The same can be said for electricity in the UK, historically the UK had used coal to produce electricity as it was the cheapest means of production. With the ever more growing evidence of what the burning of fossil fuels does to the planet, the supply of electricity is now produced by using a mixture of components such as gas, nuclear energy, coal and renewable sources. Some of this produced in the UK and some is imported.
According to the Office for National Statistics, as we are still highly reliant on the burning of fossil fuels, in 2021 the UK imported nearly 2 million tonnes of coal from Russia, over 1 million tonnes from the USA, half a million tonnes from Australia and just under half a million tonnes from inside the EU and Venezuela.
The UK also imported over 300 Tera Watt Hours (TWh) of gas from Norway (pipeline), nearly 100 TWh from Qatar and around 50 TWh from the USA and Russia.
How much does it cost the UK to import its energy?
Whilst we are all counting the pounds being paid to the energy companies at the moment, it is important to know how much the UK government spends on the fuel we use to power the country.
The UK has seen an increase in fuel imports since mid 2021. During the 12 months to April 2022, imports of fuel from non-EU countries totalled £64.7 billion, an increase of £42.6 billion (193%). That is roughly £962 per person living in the UK per year. Quite a staggering amount and that is just on fuel to power the country!
Why does the UK import so much energy?
You may think that as a modern nation that is considered one of the world leaders in economics and culture that we would have an ample supply of gas reserves to fuel the country, unfortunately this is where we are wrong.
According to Gas Infrastructure Europe, the UK has got just 10 TWh of gas to use. Italy has 166, France has 125, Germany 216 and the Netherlands 116. According to Ofgem, the UK’s storage levels are ‘historically low’.
Compared to the other countries in Europe we use a remarkable amount. We consume 512TWh of gas per year compared to the Netherlands who use 408.67 TWh. So, considering the size of the UK, we use a lot! More than we can produce ourselves, and because of the unwillingness to and possible impracticability of switching to renewable and greener methods of energy production, we have to import it.
How much are natural resources worth on the trading market?
The cost of living is exacerbating the trouble with finding the money to pay for energy bills at the moment, most of the country is feeling it, but the price of natural resources on the trading markets does not seem to be the reason why prices are high.
According to Trading Economics, the price of natural gas has fallen in price from around 640 pence a therm in August to 300 pence a therm in the first two weeks of October. Trading Economics also say the price of natural gas has dropped by 20% within the last month, crude oil has risen 8.51% this year and gasoline has risen by 6.09%.
According to the House of Commons Library, the average household energy bill increased by 54% in April 2022 and was due to increase by a further 80% in October but has since been limited to 27% by the new Energy Price Guarantee.
So, in real terms this means if your energy bill was £210 a month then with the new price cap, your monthly energy bill will be £267 a month. This is a rough guide of the increase and is also dependant of what part of the country you live in, but as you can see the price is going up for energy, even with the price cap and with £400 rebate from the government.
Why are we paying so much in energy?
The UK has generally had lower energy prices than most of Europe for a long time but now the prices have gone up we are really feeling the pinch. There have been many, many theories of why bills have risen so much from the Russian Invasion of Ukraine to the greed of energy companies.
It has been suggested by Economics Observatory that there are a number of reasons why our energy prices have risen so dramatically, sighting the main reason that the cost of importing gas has risen.
The price we pay for our energy bills is not just for the product itself but also for the transportation of the product through pipes, wires, tubes and by road, sea and air. With the cost rising all across the board, the price for the overall package has been put up.
The overall demand for gas has risen all around the world post-lockdowns but the rate of production has fallen behind, hence the prices have risen. There is a gap in the market to make more money from the energy companies’ side, which it would seem, with many people agreeing with, has been exploited with the price being passed along to the customer. Even the chief of the UN has criticised the big energy companies for their seemingly uncaring attitude towards the effect it has on their customers.
As mentioned further up, the War in Ukraine could also be another reason why our energy prices have increased. As we are reliant, though getting less and less so, on gas and other energy sources from Russia, the invasion has brought along difficulties in getting the sources we need to the UK. One being the sanctions held against Russia and two being the pipelines that carry resources that travel through Europe and, most notably through Ukraine, being disturbed by the war.
Soaring global demands for liquified natural gas in a bid to switch from coal energy to gas energy and an increased demand from Asian and South American countries has seen the price go up as well. According to McKinsey & Company, China imported more gas than previous years in the first half of 2021. Also, South American countries have upped their demand with Brazil and Argentina reaching record levels in 2021.
With ongoing world events and a huge demand for gas and energy, prices have gone up to capitalise on the demand around the world.
What can I do to reduce my energy bill?
For most people in the country at the moment, this is the number one question. What can I do to save energy and reduce my bill? According to Energy Saving Trust there are a number of simple things you can do to reduce energy usage and your energy bill.
Understand your energy bill. This is number one. You have to know what you are looking at before you get start to make changes to improve it.
Turn off lights. So simple but so effective. If you aren’t in a room then the light doesn’t need to be on. It has been reported that this can save up to £25 a year on your annual bill.
Turn off standby. Most appliances can be turned off at the wall and off of standby mode. Standby is good if you want to quickly turn something on but all the time you are not using it and it is idly sitting and wasting electricity, it is costing you money. Turning appliances off of standby can save up £65 a year from your energy bill.
Draught-proof your windows and doors. Reduce the heating loss from your home and have the cracks in your walls, doors, floors and skirting boards filled in can save you about £125 a year.
Shower instead of bath. Save water by swapping at least one bath a week for a short shower can save around £20 a year and if you keep your shower to around 4 minutes, you will be saving one of our most precious natural resources, water.
Cool it in the kitchen. We all love a brew in the UK and most of us would admit to filling the ketal with more water than we need. This uses more energy to boil the water and piles it on to the bill. By avoiding the overfilling, you can save yourself around £13 a year on your electricity bill.
Watch your washing. According to 001 appliance specialists, depending on the tariff you are on, potentially means that doing your laundry in the evening will save you money on your bill. Also, reducing your washing by once a week and washing on a lower spin and temperature cycle can save you up to £34 from your bill.
As you can see there are plenty of easy ways to reduce your energy bill. It doesn’t seem a lot but all of these little changes and savings soon add up.
Will the price go back to the way it was soon?
There are conflicting views whether or not the price of our energy will go down any time soon with some people saying it will do by next year and some people saying this high price is likely to last until 2024 at least.
World events, fluctuating gas prices and the demand for resources pushing the prices of commodities up and the costly burden is passed along to the consumer, it is hard to say when the prices will fall again.
What can I do to reduce my spending for the things I need?
Along with saving energy because of the high rates and the cost-of-living crisis, you may be thinking of other ways to save a bit of money. We have come up with a few ways that are simple and easy ways to save money.
Shop second hand. Shopping in charity shops not only helps a good cause but they are also a treasure trove or cheap and individual fashion. Saving you money whilst helping others.
Ditch the car. We know it isn’t always practical to walk or cycle everywhere but if you use your car even once or twice less a week, you could save a huge amount in the long run.
Fun and free days out. Who said good times have to cost money? You could get some friends together for a nice walk, take a book to sit in a park, find free days out online or simply get together with your nearest and dearest in a place you like and spend time together.
It is a hard time for the majority of the UK at the moment but with a few practical ideas there is a way to ease the burden brought on by energy prices and the cost-of-living crisis.