Energy Pricing Report 19th February 2021

Energy bills are driven by both the price of energy on the wholesale market and Third-Party Costs (TPCs). TPCs include non-energy costs set by the government, network (the National Grid), policy and system costs and electricity transmission/distribution costs.

The biggest single cost on a bill is the price of the energy. The wholesale cost of the energy makes up approximately 40% of an electricity bill and 70% of a gas bill, with the remaining being TPCs, which have been continuously rising in recent years and can be volatile.

This pricing report focusses on the energy element of a bill to help you keep track and understand the wholesale energy market and the factors affecting the price of your contracts.


Overview:

Oil has seen the longest streak of daily gains since February 2019, as a decline in US crude oil inventories highlight depleting global supplies, mainly because of OPEC+ production curbs.


Winter storms in Texas have hit record levels and temperatures across the US have plummeted driving up demand for heating fuels. Texas has reached single-digit temperatures and since Thursday has been hit by snow and sleet, with even more expected. This, in turn, has impacted oil production along with outages, currently affecting 1.27 million people.


Temperatures in the UK, on the other hand, are forecasted to be higher than seasonal norms, with increase wind generation expected which will result in a drop in demand for energy along with a drop in the reliance on burning fossil fuels and help make contract prices slightly cheaper.


Global vaccination efforts continue, bringing hopes of life returning to some form of normality soon and a recovery in oil demand. At least 178,092,680 doses of coronavirus vaccines have been administered around the world.


According to a new report by ElectraLink (who are responsible for operating the data hub that underpins the UK energy market), energy switching decreased by almost a quarter in January, compared to the previous month. With Ofgem’s recent announcement of an increase in the standard variable tariff price cap, along with Third Party charges set to increase this April, try to avoid the more expensive tariffs by switching your next business energy now.


Bullish Factors (upward pressure on markets):

· Rising tensions in the Middle East.

· Reduction in oil surplus, mainly from OPEC+ production cutbacks.

· Record winter storms hitting Texas, also impacting oil production.