The UK government is lying about energy prices

:: economics, doomed, politics

The UK government would like you to believe that the recent increases in the rate people pay for energy are due to the war in Ukraine. This is a lie.

This article from the BBC news contains the following statement:

Energy bills are the biggest contributor to inflation at present, largely because of the impact of the Ukraine war on oil and gas prices. After a rise in the UK’s energy price cap last month, average gas and electricity prices jumped by 53.5% and 95.5% respectively compared with a year ago.

Note in particular that they claim that energy bills, which are indeed the largest contributor to inflation, have risen ‘largely because of the impact of the Ukraine war on oil and gas prices’. In this the BBC is, I am sure innocently, simply repeating what the UK government wants us to believe.

But this statement is false: the UK government is lying, again. It is lying in order to make it less obvious that it is both grossly incompetent and simply does not care about the people of the UK.

First of all this statement should immediately make you wonder: what happened in 2021? I got a message from my former energy supplier on 14th October 2021, 133 days before Russia invaded Ukraine, which reads in part

Due to the global energy crisis, record high wholesale energy costs, and the restrictions placed on us by the Ofgem Price Cap, we are sadly unable to keep operating [supplier]. […] The Government and Ofgem, our regulator, expects [supplier] to sell energy at a price much less than it currently costs to buy.

My former supplier, along with many other suppliers, went out of business in 2021: that means the energy crisis was well underway by 2021.

But perhaps there is an escape: there was an energy crisis by 2021, yes, but perhaps the current crisis is still largely due to the war in Ukraine.

That also is false. Look at this document, in which Ofgem announced the increase in the tariff cap, and in particular look at the attached letter (PDF link). From that letter, you can read this:

To all market participants and interested parties […] The level of the cap for the cap period eight (1 April 2022 to 30 September 2022) has increased by 54% since the last update. From 1 April 2022, the level of the cap will increase to £1,971.

This letter is announcing the rise in the tariff cap described by the BBC above: about 54%. It is dated 3rd February 2022: almost a month before Russia invaded Ukraine.

And indeed on 24th February 2022, coincidentally the day Russia invaded Ukraine, I received a letter from my current energy supplier in which the folloing text appears:

Our prices are changing to reflect high wholesale energy costs in line with Ofgem’s latest price cap review.


Your current tariff [for electricity and gas]: £ T. Your new tariff: £ T × 1.4 […] Your electricity rates will change from 21.607p to 28.408p per kWh and your standing charge per day will change from 25.66p to 51.62p. Your gas rates will change from 4.197p to 7.476p per kWh and your standing charge per day will change from 26.11p to 27.22p

[I have replaced the specific amounts I pay by T above.]

That capped tariff is the tariff I, along with almost everyone else, is currently paying. The new cap was set in early February 2022 for implementatation on 1 April 2022. The war in Ukraine has had no influence on this cap, because it was agreed well in advance of the war.

In summary: The war in Ukraine has not yet influenced retail energy prices in the UK because the cap was decided in early February 2022 at the latest. To say otherwise is to spread misinformation.

Of course, the war in Ukraine will influence retail energy prices: the current cap runs until 30 September 2022. It is safe to say that when it expires there will be some very bad news indeed about UK retail energy prices. Combined with the certain large increases in the price of staple foods, the winter of 2022 is going to be extremely unpleasant: I think it not unlikely that significant numbers of people in the UK may well start to starve to death.

But this has not happened yet.