With Rocketing Gas Prices Pushing Up Bills, David Cameron Must Stop the New 'Dash for Gas'

The energy companies deserve criticism; their tariffs are almost as confusing as the government's policies. But they are also a distraction. What's driven up consumer bills is the price of gas. If the prime minister wants to stabilise them, he'll need to stand up to his Chancellor, not just the utilities.

Look beyond all the confusion over energy tariffs, and last week's shambles over the government's new energy policy, and there's a simple explanation for why everybody's energy bills are going up - and that's the price of gas.

Between March 2011 and March 2012 the average bill rose by around £150. Around £100 of that was due to the higher wholesale cost of gas. As energy regulator Ofgem explains, "Higher gas prices have been the main driver of increasing energy bills over the last eight years."

The unpredictable nature of the global gas market means that British families and businesses are completely exposed to this roulette wheel of international gas prices.

Since nobody really knows how much gas prices will go up by, households are left to juggle their budgets at the whim of random global events. For example, over the course of a few months in 2008 energy bills here in the UK shot up by 20% because of a surge in demand for gas in Asia. Similarly, in 2011 random international events - this time the Fukushima disaster in Japan, and unrest in the Middle East - caused bills here in Britain to jump by 18%.

The government's own energy advisers found that £290 was added to an average household bill between 2004 and 2010 solely because of gas price hikes. Incidentally, that's ten times more than was added due to the costs of the green schemes designed to reduce our dependency on expensive gas imports by enabling us to switch to homegrown renewables instead.

Now the CBI chief John Cridland is warning, "Look at European gas price projections. They all disagree on the number, but they all agree on the direction - up." Over the weekend, the former Conservative Energy Minister Charles Hendry added his voice of caution over the expense of gas, writing, "As the International Energy Agency says, we may face a golden age for gas, but don't assume it will be cheap."

So it's no surprise that major high street businesses are rallying their support behind calls from the Liberal Democrats, Labour, Parliament's Energy Select Committee, and the government's climate and energy advisers - the Committee on Climate Change, who are all supporting a new legal requirement for decarbonisation of electricity that would ensure we don't become over-dependent upon gas.

The problem for the government is that their Chancellor apparently won't budge.

He persists with the curious belief that "gas is cheap", arguably easier to believe if you are unlikely to have ever troubled too much with your own gas bill. As a consequence the government's energy reforms - and upcoming gas strategy - are in chaos.

Advised by the mercurial Professor Dieter Helm, who appears to know something nobody else has heard about the future direction of international gas prices, Mr Osborne plans a new 'dash for gas.'

So convinced was the Chancellor of the professor's predictions - which differ starkly from those of his own government - that he decided to launch his flagship measures to promote gas in the middle of the energy bill news season. He apparently believed they would be seen as a way to bring down bills.

All attempts to convince him to change course have so far failed. As his leaked letter to Lib Dem energy secretary Ed Davey revealed, Mr Osborne is determined that all other aspects of policy are entirely subsumed by his plan to turn the UK into an international "gas hub."

So what is a prime minister, apparently more attuned to the public mood, to do? With bills rising thanks to the rocketing price of gas, and his Chancellor publicly fighting for us to be almost entirely dependent on gas imports, an embattled David Cameron turned - as politicians usually do at this time of year - on the energy companies.

The energy companies deserve criticism; their tariffs are almost as confusing as the government's policies. But they are also a distraction. What's driven up consumer bills is the price of gas. If the prime minister wants to stabilise them, he'll need to stand up to his Chancellor, not just the utilities.

Close

What's Hot