- £9.8bn has been added to UK energy and road transport costs since February 28
- £76 per household has already been added to average road fuel spending
- Energy bills could rise by more than £160 per household next year if wholesale gas prices remain elevated
UK households and businesses are facing an almost £10bn increase in energy and fuel costs as higher oil and gas prices continue to feed through from the conflict involving the US and Iran.
Analysis by the Energy and Climate Intelligence Unit estimates that wholesale price increases since the conflict began on February 28 have added around £9.8bn to the UK's energy and road transport costs.
More than £5bn of that is linked to higher gas and electricity costs that are expected to feed into bills next year, while around £4.7bn has already been paid by motorists through higher road fuel prices.
The figures highlight how quickly geopolitical turmoil in energy-producing regions can reach British households, even when the conflict itself is thousands of miles away.
The weekly cost is still rising
The financial impact is not fixed.
The ECIU estimates that every additional week the conflict continues could add around £190m to UK gas and electricity costs.
That is on top of roughly £183m a week in additional road fuel costs already being paid at petrol stations.
The full impact of higher wholesale gas prices on household energy bills is expected to become clearer next year because suppliers typically buy energy through contracts rather than passing every wholesale price movement directly to consumers immediately.
Analysts at Cornwall Insight have forecast that household energy bills could rise by another 9 per cent in the new year, potentially taking the average January bill to around £1,872.
If wholesale gas prices remain elevated, the ECIU estimates they could add more than £160 to the average dual-fuel household bill next year.
Unlike the future impact on electricity and gas bills, much of the increase in road fuel costs is already being felt.
Higher petrol and diesel prices have increased average household spending on road fuel by around 14 per cent, equivalent to roughly £76 per household so far.
That figure would continue to rise if fuel prices remain elevated.
For households already dealing with high living costs, the combination of higher fuel spending and the prospect of more expensive energy bills could put further pressure on disposable income.
Moreover, the pressure extends beyond households.
British industry, commercial businesses and the public sector are also facing higher energy and transport costs.
The ECIU estimates that businesses and other non-household users could face an additional £100m a week in gas and electricity costs filtering through next year.
They are already spending another roughly £100m a week on road fuel.
For energy-intensive industries, the impact could be particularly significant because higher wholesale gas prices can increase production and operating costs, potentially feeding into the prices of goods and services.
Why Britain is exposed
The ECIU argues that the latest price shock highlights Britain's continued dependence on internationally traded oil and gas.
Jess Ralston, head of energy at the ECIU, said the volatility demonstrated how geopolitical events can directly affect the UK's cost of living because of its reliance on fossil fuels.
The organisation argues that expanding domestic renewable energy and reducing demand for oil and gas could make households less exposed to future international price shocks.
That includes greater use of technologies such as rooftop and balcony solar, heat pumps and electric vehicles.
But even if the conflict ends, the pressure on gas prices may not disappear immediately.
Damage to the Ras Laffan gas facility could have longer-term effects on liquefied natural gas markets, potentially keeping prices elevated even after the immediate geopolitical crisis eases.
The result is a familiar problem for Britain: the longer the energy shock lasts, the more of the cost eventually finds its way into household bills, business costs and prices across the economy.
