Storms ahead for all energy prices, not only electricity.
Inflation inflating. Stock markets trembling. Cost of energy becoming the key issue for the British government. Never has business needed a fast, reliable “What If?” financial program like Forecast 5 more than now. It is time for calm reflection and careful analysis. Johnny Kipps, the UK boss of Forecast 5, is doing just that. He is embarking on the January ARC rally across the Atlantic on the good yacht Invictus. He and Juliet have joined 75 owner-skippered boats in Las Palmas de Gran Canaria that will sail 2,700 nautical miles to St Lucia on January 9. You can follow his progress here and we shall update those of you who would like to know more about the voyage via a new button on our website.
Rising energy prices cause inflation
Johnny and Juliet Kipps do their bit to save energy as they prepare to sail across the Atlantic on the yacht Invictus.
Wednesday’s Prime Minister’s Questions provided a sense of what the main political battles will be this year. The cost of living – and in particular, energy prices – dominated the session, but there were also worries about the pressure on the NHS. The UK has outlawed fracking, forced the closure of all the coal power stations, been complicit in the conversion of half the Drax power station, previously the largest coal fired power station in Europe, to run on pelleted trees chopped down in US forests, shipped across the Atlantic by diesel powered vessels only made possible by the EU ruling that accounting for wood burning is regarded as “carbon neutral”.
And on top of that the support for nuclear power has been weak while the government has continued to push for unreliable sources of power like wind and solar although the Energy White Paper published on December 14 now identifies nuclear power as a way to help the country achieve the four-fold increase in clean energy generation. Successive UK governments have all colluded in this terrible ongoing destruction of the UK economy.
A leaked memo from the US Federal Reserve says that it is considering raising interest rates as early as March. This wiped 1.1% off the value of the Dow Jones and 3.3% off Nasdeq, according to a BBC World report on Thursday.
Electricity, gas and petrol all up
The Department for Business, Energy and Industrial Strategy’s energy report only goes to September 2021—but it already shows an uptick in prices. Based on fixed consumption levels of 13,600 kWh for gas and 3,600 kWh for standard electricity, the provisional average combined domestic energy bill for 2021 was £1,339. This is an estimated increase of 6.0 per cent compared with the average of £1,264 in 2020. The average standard electricity bill increased by 8.1 per cent or £57 to £764 in 2021. The average gas bill increased by 3.3 per cent or £18 to £575 in 2021. There has been a crisis around the world with record natural gas, coal and electricity prices. The causes are a combination of post-pandemic recovery, extreme weather events and fractious geopolitics, which have increased demand and compromised supply.
Jim Pickard, Nathalie Thomas and George Parker, writing in the FT last Tuesday, said that Chancellor Rishi Sunak has warned colleagues that there is a limit to how much help the government can give to offset soaring energy prices, and that support should be targeted at UK households that need it most.
So who will help?
“There’s only so much the government can do,” said one Sunak ally, noting that energy prices could remain high for a significant time. Sunak, who is waiting for government officials to draw up detailed proposals after representations by the energy industry, is wary of making an open-ended commitment when he is trying to rein in state borrowing. Asked about rising energy bills, Boris Johnson said at a press conference on Tuesday that Sunak was “mindful” of the problem. “We are going to do what we can to help,” he added.
In The Spectator, James Forsyth said 2022 looks like being the most politically difficult year yet for Johnson. Even if the government’s decision not to impose more restrictions ends up looking justified, he’ll still have to deal with the cost of living crisis that rising inflation will cause. At the moment, the government has no plan for how to help voters with this. That is politically unsustainable.
Whichever way you read the runes, it looks as if there are head winds and troubled waters ahead. There is no better time to take a trip around the Forecast 5 website and see how it can help you chart your way through 2022. While Johnny and Juliet brave the waves, the Forecast 5 team are available to help and answer questions at support@forecast5.com.