Most people will agree that the price of energy is on the rise. As a matter of fact, consumers are set to take another rate hike hit within the next few weeks. It may be interesting, as you look for ways to lower your gas and electricity bills to make a visit to yesteryear and do a quick price compare between the two.
Decades ago, gas and electricity prices were on a downswing primarily due to privatization of energy services that ultimately led to competition for consumer accounts. As new players in the gas and electricity industry struggled to get a foothold, consumers were the beneficiaries of the increased competition. Prices throughout the 1980s and the 1990s remained relatively steady. They even fell during a few of those years.
But as we brace for yet another rate hike, we are greeted with the news that some experts predict that energy prices will rise another 50 percent before the year 2020. And even though many energy industry executives insist that the UK has some of the lowest energy prices in the whole of Europe, that assertion does not appease energy consumers who are struggling to make ends meet and who are now faced with conducting a price compare to find the best-priced supplier.
Gas and electricity prices began to rise in earnest around the year 2005. Between 2005 and 2009, combined gas and electricity bills rose a good 30 percent. Three factors have driven these price increases. One, the fact that the UK has few resources of its own to draw upon. Second, the need for UK energy suppliers to tap foreign markets for energy fuel. And, third, the increased cost of delivering fuel purchased on foreign markets across wider distances to get it delivered to UK consumers.
The recent economic crisis has also been cited as a reason for rising prices. As global markets work to recover from the crisis, fuel prices have been fluctuating. But that is not the entire story. Gas and electricity suppliers here at home have been struggling with some tough decisions.
Many energy industry experts insist that gas and electricity suppliers have to choose between keeping prices low and keeping energy flowing. Decades ago, that decision was easy since the cost of fuel was so reasonable. However, recent developments have forced gas and electricity suppliers to choose the latter. It is simply more important, when faced with a choice, to keep fuel flowing than to keep it cheap.
But why has this choice become necessary?
Overall, it is clear that prices are rising. But with consumers asking why, gas and electricity suppliers have had to answer some hard questions. Again, three reasons are to blame – the dwindling supply of fossil fuel within the UK, the overall rise of fuel prices on the international markets, and the increased cost of delivering fuel over a longer distance.
As UK fossil fuel resources have dwindled, UK gas and electricity suppliers have been forced to compete for stores on the international market. This has given UK suppliers fare less control over prices than when internal resources are used. UK suppliers are also forced to raise prices according to what they have to pay for fuel on the international market. In other words, any increases in international market prices are passed along to the consumer.
Understandably, it costs far more to transport fuel from various international locations than it does to transport fuel within the UK. For this reason, gas and electricity suppliers cite rising transportation prices as the second reason that they have been forced to raise rates. Additionally, as the price of gas continues to rise, delivery and transportation costs will also rise in a sort of circle of rising rates.
It is not difficult to see why gas and electricity rates are on the rise. What is difficult to see, however, is the point when the rate hikes will end. With no real end in sight, and no way to really predict what gas and electricity prices will do past the year 2020, consumers are at a loss. Faced with their own choices of running a quick price compare and switching to a lower priced provider that offers a lower rate and a better rate plan, along with working furiously to lower the actual amount of energy they use, consumers are scrambling to implement their own plans before the next energy rate hike.