If petrol costs increased at the same rate as household bills, you could be forking out £400-£500 to fill up your tank. And if the same hikes were applied to the cost of an average family home, a property of £281,000 would shoot up to over half a million pounds.
If applied to your favourite drinks, a pint of beer could cost £33 while the average coffee could cost a scorching £28.
That’s according to industry experts, who’ve been drawing on these analogies to demonstrate just how much energy bills are soaring by following the latest price cap announcement.
Ofgem’s new price cap means that from October, the average household will pay around £3,549 per year for their energy.
This is a huge 80% increase from the current energy price cap of £1,971 and an even larger jump up from winter 2021, where the cap sat at £1,277. This time last year – before this mess really began – average household energy bills in August sat at £1,138 per annum.
Jonathan Brearley, chief executive for the energy regulator Ofgem, was keen to highlight why this huge change is set to come in this autumn. He also came up with a pretty shocking analogy, claiming that if wholesale petrol prices were rising at the same rate as household gas, we’d be paying £400 – £500 to fill up a tank right now.
”Let me explain what is happening out there in the market, which is causing this,” Brearley told BBC Radio 4′s Today programme.
“We have seen the slow and deliberate shut off of one of Europe’s major supplies, Russia, of their gas. Now, that has caused enormous price spikes in the market.
“So right now, when I look at winter prices, they are 15 times the normal price that led to that £1,100 [average household] bill.
“To give you an idea, that means to fill your car – if that were happening in petrol – would cost £400-£500 each time.
“We are seeing a dramatic change in the cost of energy that we need to buy, and ultimately that drives this figure of £3,549.”
The wholesale gas prices drive the energy price cap, as suppliers have to buy the gas from countries, such as Russia, before dividing it among households and businesses.
How does the petrol analogy work?
The pence per litre (pump price) for petrol is currently 170.6p, according to the transport policy and research organisation, the RAC Foundation.
For the average 55-litre tank, this will cost £93.83.
But if the price for petrol leapt up at the same rate as household gas, this would make one litre of petrol between 700p and 900p, according to Brearley’s calculations.
If a 55-litre tank cost £400, one litre of petrol would cost 727.3p. If the same tank cost £500, it would mean one litre of petrol was 909p.
And, for context, the price of petrol is already higher than usual right now.
Only in June, the average cost of filling a typical family car with petrol exceeded £100 – and that was considered a huge hike in pricing – although it has gone down, marginally, since then.
The RAC’s Simon Williams said at the time that this increase was “truly a dark day” for drivers, as it was the first time petrol has ever reached that price.
He added: “While fuel prices have been setting new records on a daily basis, households up and down the country may never have expected to see the cost of filling an average-sized family car reach three figures.”
So, for gas prices to be equal to £500 a tank of petrol, it demonstrates just how alarming this latest announcement is.
Other comparable price rises
Another helpful analogy to understand just how much gas prices are climbing came from Octopus Energy chief executive Greg Jackson.
Earlier this week, he told Radio 4′s Today programme that if beer had risen at the same rate as global gas prices, a pint of beer would now be £25.
After October’s price cap was announced (as wholesale gas costs became even more expensive), the Financial Times’ Claer Barrett estimated that gas prices are the equivalent of charging £33 for a pint of beer.
She also compared this to a £28 cup of coffee, and £102 for 20 Marlboro Light cigarettes.
Meanwhile, Energy Saving Expert Ava Kelly told HuffPost UK that if house prices matched energy hikes, the average price of a family house in the UK rising from £281,000 to over half a million pounds, at £505,000.
Ripple Energy also told HuffPost UK that, according to its calculations, the average price of cooking a Sunday roast was £1.02 in 2019.
April’s energy price cap increase was the equivalent to increasing the cost of a Sunday roast to £1.68, while today’s announcement for October takes the meal to £3.12.
What impact does the price cap have on other costs?
The soaring energy bills are driving inflation across the board, as businesses have to pass on the extra costs to consumers.
Inflation is at 10.1% right now, but set to go even higher – with Citi investment bank forecasting that it might even reach 18.6% come January.
For context, the Bank of England’s target inflation rate is 2%.
This latest announcement will add to already widespread fears of fuel poverty this winter.
There were already 3.16 million UK households in fuel poverty in 2019, according to the campaign group, End Fuel Poverty Coalition.
This rose to 6.32 million when the energy price cap rose in April this year – 2.5 million of these households have children.
An alarming new study from the University of York has also estimated that 45 million Brits will be in fuel poverty this winter.