What’s happening to energy prices right now?
Explaining the latest rise in energy prices and what it means for UK households.
Energy prices are back in the news after wholesale gas prices have risen sharply. The increase follows escalating conflict in the Middle East, including disruption to shipping routes through the Strait of Hormuz – one of the world’s most important transport routes for oil and liquefied natural gas (LNG).
Events like this can quickly ripple through global energy markets. But what does that actually mean for UK energy bills – and why do international conflicts affect what we pay here at home?
Our CEO Nigel shares an update for our customers about what’s happening in the market and what it means for you.
Why global events affect UK energy prices
The UK is one of the most gas-dependent countries in Western Europe.
Gas plays two major roles in our energy system:
- It generates a large share of our electricity
- It’s the main way most UK homes are heated
As Good Energy CEO Nigel Pocklington explained in a recent BBC Radio 5 Live interview, the UK remains heavily reliant on imported gas, producing only around 30% of the gas it uses domestically.
That means global supply disruptions – whether from geopolitical conflict, shipping disruption, or damage to energy infrastructure – can quickly affect prices.
Much of the gas Europe relies on now arrives as liquefied natural gas (LNG) from suppliers such as the United States and Qatar. If supply from these markets becomes uncertain, prices can rise rapidly as countries compete for available shipments.
Why do electricity prices rise when gas prices rise?
Even if your electricity comes from renewable sources like wind or solar, the price you pay for electricity is still influenced by gas.
That’s because electricity prices are typically set by the most expensive generator needed to meet demand at any given moment. In many cases, that generator is a gas-fired power station.
As a result, the price of gas often determines the wholesale price of electricity – regardless of whether the electricity itself was generated by wind, solar or hydro.
This is why spikes in gas prices tend to push up electricity prices too.
On a windy or sunny day, renewables can generate around half of the UK’s electricity, but the market pricing mechanism still means gas can determine the overall price.
Why are fixed tariffs being withdrawn?
You may have seen that some energy suppliers, including Good Energy, have temporarily withdrawn fixed tariffs.
When suppliers offer a fixed tariff, they typically purchase the energy needed to supply that contract in advance. This protects both the customer and the supplier from price fluctuations during the fixed period. But when wholesale prices move quickly and unpredictably, suppliers may pause offering new fixed tariffs while markets stabilise. Otherwise they risk offering a price that doesn’t reflect the true cost of energy.
This doesn’t affect customers who are already on a fixed tariff – their price remains fixed for the duration of their contract. We will continue to monitor developments and our tariff offering.
What’s the long-term solution?
The situation highlights a longer-term challenge for the UK energy system. Domestic gas production has been declining for decades, and even if new reserves were developed, they would only add a small amount to overall supply.
That means the UK would continue to rely on international markets for a large share of its energy, and remain exposed to price volatility as a result.
Expanding homegrown renewable energy offers a different path. Wind and solar don’t rely on imported fuel, and once built their costs are largely stable. Increasing domestic renewable generation – alongside storage, smarter grids and electrification – is widely seen as one of the most effective ways to reduce long-term energy price volatility while strengthening the UK’s energy security.
