The Price of Power

The debate over energy prices has become increasingly heated over the last few days after the parliamentary committee so I wanted to just do a quick post about the situation. Understanding energy pricing is a really important aspect in understanding the energy market so this is a quick look at exactly how much we pay for our energy.

The Office for National Statistics has recently published a report on household expenditure. There are a couple of really important points I wanted to highlight from it:

• Household disposable income has flat lined for the last four years
• The proportion of household income spent on essentials has increased by almost half in a decade:  from 19.9% in 2003 to 27.3% in 2013
• The increase spent on gas and electricity in the same decade almost doubled: from 1.8% in 2003 to 3.1% in 2013. 

Source (ONS Parliamentary Briefing PDF October 2013)

This graph shows the relative yearly change in energy prices relative to the general price index. The 1980s saw a similar increase due to the recession but today’s relative prices are still higher. The volatility in heating oils (black line) over the last few decades can be linked to the oil shocks of the 70s. 

Source: DECC quarterly fuel prices table 2.1.1

Efforts such as the winter fuel allowance are incredibly important to support vulnerable people but there is no denying that the government will need to look further to help protect the consumer. It will be interesting how the politics around this develop and maybe the subject of another blog post soon!