UK Economy Faces Gas Price Risks Ahead of Winter

The UK economy faces a bigger threat from natural gas prices than oil prices due to their direct impact on household energy bills and electricity prices.

Wholesale natural gas prices have climbed back to near their March peak, with a current price of 147.6 pence per thermal unit compared to 96.5p in June.

This has increased the risk of another cold winter leading to a fresh spike in prices, pushing inflation higher and squeezing household incomes, particularly given that utility bills account for around 3.1% of household spending.

The Ofgem energy price cap has already risen by 13% in July, and with wholesale gas prices rebounding, another increase in October now looks likely.