Warning UK energy bills set to rise as gas crisis grips Europe

Energy bills look set to rise this summer as freezing temperatures and a supply crunch threaten to push up wholesale gas prices.

Experts warn price signals suggest the UK’s cost-of-living crisis is still hurting households despite hopes 2025 would see an end to high prices.

Dr Jack Sharples, a Senior Research Fellow at The Oxford Institute for Energy Studies, explained how the wholesale gas market has tightened amid ‘s war in and Europe pivoting away from Russian gas towards supplies from other countries, including the US, Norway and Azerbaijan.

He said Europe is set to lose 15 billion cubic metres (BCM) of gas this year, equating to 4% of supply in 2024. This is enough to push the market slightly tighter still in a global market for Liquefied Natural Gas (LNG) which is already tight.

The expert said forward prices are “ever so slightly” higher for the summer months of 2025 than for the winter of 2025-26.

Britain and Europe are waiting for a wave of LNG to come on the market in late 2025, meaning growth in supplies should outstrip demand and bring prices back down but not for several months. But prices are tipped to remain elevated until then.

Consumer gas prices in Britain are calculated from a combination of forward and historic prices. Dr Sharples said the expectation could be that prices remain high, but flat, and possibly won’t drop this summer.

He warned that if there is another cold spell in Europe, or East Asia suffers a more marked winter chill, then demand for LNG will increase and push prices up again.

Dr Sharples said: “When the market is finely balanced, and you tip either side of the scales, you get a much more noticeable price response.

“If supply was to drop by five percent, then you’re going to have to go out into the global market and secure additional volumes. That’s why prices are where they are right now. But we’re a long way from the price spikes of 2022.”

Danni Hewson, Head of Financial Analysis at AJ Bell, said reports of pressure on gas supplies show the country is yet to fully emerge from the cost-of-living crisis.

She said: “It’s worth pointing out that prices and storage levels aren’t anywhere close to 2022 levels, but as a cold snap currently has many of us nudging the heating on for a few more hours, any hint all is not well is cause for concern.”

Ms Hewson added that while the UK is using more renewable sources of energy when it comes to electricity generation, heating our homes is a different matter.

Britain recently hit a major milestone as wind overtook gas to become the largest source of power for the first time in 2024.

The expert said: “With wholesale prices going up it is likely to cause more pain for UK households in the months to come especially if this winter is a long cold one.

“Many people had hoped 2025 would be the year when the cost-of-living crisis was put to bed for good, but there are little signs everywhere that prices aren’t playing ball.”

A Department for Energy Security and Net Zero Spokesperson said: “We have no concerns and are confident we will have a sufficient gas supply and electricity capacity to meet demand this winter, due to our diverse and resilient energy system.

“Our mission to make Britain a clean energy superpower will maintain the UK’s energy security in the long term – investing in clean homegrown power and protecting billpayers.”

The Government insists gas storage levels fluctuate throughout the winter and that operators have assessed there will be sufficient supply to meet the country’s demand this winter.

A recent Statutory Security of Supply Report concluded Britain is expected to have enough electricity and gas supplies to meet consumer demands over the short and long-term.

Before Russian president ordered his troops to invade , the country supplied Europe with about 30 percent of the continent’s pipelined gas. After the invasion, there was a huge decline in the volume of gas coming from , forcing the European market to rebalance.

Gas prices went through the roof, Europe imported more LNG from the global market and consumers limited their energy use as energy bills soared. Dr Sharples said Europe’s industrial sector bore the brunt of the energy crisis, with eastern European countries such as Slovakia, Germany and Austria, among the worst affected.

In 2021, Europe received 142 billion cubic metres (BCM) of gas from . By 2024, this had plummeted to 30BCM. The gas market was squeezed futher when closed a pipeline transporting Russian gas to Europe earlier this month.

European gas stock levels remain “pretty healthy”, according to Dr Sharples, who said figures from Gas Infrastructure Europe this week showed storage levels at 69 percent.

He explained storage capacity differs between the UK and Europe, with the continent storing the equivalent of about 106 BCM at the start of winter compared to about three billion cubic metres.

This is because the UK does not build up a winter reserve, having historically relied on its own supplies. The country is now “well-connected” to supplies from Europe and Norway, allowing the country to top up as and when it is needed.

Dr Sharples warned, however, that the major issue now is how much gas is left in storage in the UK and Europe at the end of this winter. He said: “Whatever we have taken out of storage by the end of March has to be replenished in the summer.”

He explained analysts already anticipate the need to put more gas back in storage this year compared to 2024, but this could cost the country more given where wholesale prices are.

Natural gas futures rallied above 125p per therm last week for the first time since October 2023. The price dropped back to 121p on Tuesday amid forecasts of milder weather next week, according to Trading Economics.

It put European gas storage at 70% capacity, down from 85% last year. Trading Economics said this leaves the UK “vulnerable” to supply disruptions because of its “limited storage and reliance on European infrastructure”.