Reliable energy supply is vital to businesses of all sizes. The competitive UK energy market provides consumers with not only the opportunity to choose the best service, but also compare rates and find the most affordable price. However, prices are not stationary and will always depend on various factors that impact the market’s behaviour.
Most people often ignore or fail to understand how the global market, as well as political, and economic factors, impact the energy rates on offer. This article aims to break down some of the most common issues that have a significant effect on the UK energy market.
What is IEM and how will the UK’s exclusion impact energy prices?
At the beginning of 2018, there were concerns regarding the possible impact of Brexit on the UK’s energy supply. Since the UK is exiting the EU, there is a possibility that gas and energy shortages will occur if the transition is not managed correctly. For many years, the UK has relied on energy supply from various countries like Norway, Ireland, the Netherlands, and other European nations. If the harmonious trade deal fails to provide the protection needed by the UK market, there could be power shortages across the country which will be detrimental to residential and commercial consumers.
But measures are already in place to mitigate and prevent these concerns from happening. The UK has already established new links to European countries for a continuous supply of energy. Although there is still uncertainty, what businesses can do is to continue to take advantage of the opportunity to shop around for competitive rates from different suppliers, either through a comparison website like Utility Bidder or through a broker. The upside to this is that by relying on a reputable supplier, you have the peace of mind that they can help guarantee a constant supply of energy.
The effect of falling oil prices around the globe
Apart from the political factors that affect wholesale energy prices, global oil prices have a long-term impact on energy costs. Businesses should understand that although oil prices are plummeting, it will not cause a linear decrease in energy prices around the country.
Suppliers like British Gas, for example, buy oil in advance to anticipate the demand on-shore. As such, they sell it based on the purchase price and not according to the current oil prices. Buying in advance is a way for these suppliers to manage the demand and prepare for possible shortages in the long run. The downside, of course, is that consumers will not necessarily benefit from the low global prices until much later on.
Since the price of oil is only a portion of what goes into the energy rates, it is safe to say that expecting your energy rates to decrease in proportion to the global prices is a big misconception. Remember that your supplier also invests in maintaining facilities, upgrading, and servicing customer need so these could also be significant factors that impact how much you pay for electricity and gas. Nevertheless, if oil prices continue to fall, then consumers can be optimistic about the possibility of spending less on their energy bills down the line.