High gas prices could last two years, warns Centrica; Whitbread sees soaring costs – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK’s energy crisis could last for two years, Centrica chief executive Chris O’Shea has warned, in a sign that the cost of living squeeze will intensify.

Speaking to the BBC, O’Shea warned that gas prices won’t fall soon, as consumers brace for bills to jump by around 50% this spring.

O’Shea, whose firm owns British Gas, the UK’s biggest energy supplier, warned that the energy squeeze will not be short-lived, so the government needs to provide targeted help to those who will suffer most.

“The market suggests the high gas prices will be here for the next 18 months to two years.”

There’s no reason to think that energy prices will come down anytime soon.

Wholesale gas price soared last year, hitting record highs towards the end of 2021. Although they have dropped back since, prices are around four times higher than a year ago.

The UK day-ahead gas price

The UK day-ahead gas price is around £2 per therm, up from 50p/therm a year ago Photograph: Refinitiv

O’Shea says the high demand for gas was partly being driven by a move away from coal and oil — creating rising demand for gas and a scramble for supplies.

“As we move towards net zero, gas is a big transition fuel.

“And so as you turn off coal-fired power stations in other countries, there isn’t an abundance of gas that you can just turn on quickly.”

BBC Breakfast

The boss of Britain’s biggest energy firm Centrica says high gas prices will remain for the ‘next 18 months to 2 years’.

On #BBCBreakfast Chris O’Shea says ‘thereafter who knows’ whether prices will drop.

January 12, 2022

But he doesn’t believe boosting supply from the North Sea as a domestic solution would have helped:

“We bring gas in from the United States, from Norway, from Europe, from Qatar, from other places. So we’re not in a position to simply have the UK as an isolated energy market. We are part of a global market.”

Bills are expected to jump by up to £700 in April after Ofgem next reviews the UK’s energy cap, taking the annual cost of electricity and gas for households on a supplier’s default tariff to £2,000, compared with £1,300 at present.

O’Shea says the government can take three steps to help:

  • Defer the cost incurred by surviving suppliers from taking on customers of the many companies that have gone bust, rather than it be added to upcoming bills.
  • Take the 5% VAT off energy temporarily or permanently.
  • Move levies charged to fund a green transition from bills to general taxation.

Those moves, he claims, could be implemented quickly:

“And that would take care of half of the price rise.

And then you could get a further relief targeted to those households that needed most.”

Pressure is mounting on the government to act, with Ofgem due to announce the price cap next month.

Last week, Liberal Democrat leader Sir Ed Davey has called for the Warm Home Discount scheme, which helps people receiving some benefits, to be expanded.

Davey argue that the Warm Home Discount should be more than doubled, from £140 to £300, and allow many more people to qualify.

O’Shea, though, argues that the current design of the Warm Home Discount scheme would see relief for some result in rises in everyone else’s bills.

You can read the full story here:

Chris Bailey

You bet

‘Chris O’Shea, CEO of British Gas owner Centrica, said there was “no reason” to expect gas prices would come down “any time soon”…He said hopes that bills rising by more than 50% to about £2,000 a year would be short-lived may be misplaced’

January 12, 2022

The cost of living squeeze means that UK households have suffered the sharpest fall in the amount of cash they have available to spend for almost eight years, as high inflation and rising energy bills hit households.

According to a report by the insurer Scottish Widows, increasing living costs at the end of last year hit people’s pockets and led to the steepest decline in cash availability since the start of 2014.

It said people were increasingly pessimistic about their future finances in 2022, according to the latest reading from its quarterly household finance index.

The agenda

  • 10am GMT: Eurozone industrial production for November
  • 1.30pm GMT: US CPI inflation for December
  • 3.30pm GMT: EIA weekly US oil inventory figures


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.