What Affects Energy Prices?

Energy prices can fluctuate dramatically, and for good reason. Understanding the key drivers behind those changes helps you make smarter purchasing decisions.

1. Wholesale Market Rates
The core driver of prices. Prices rise when wholesale gas and electricity become more expensive, usually due to supply constraints or increased demand.

2. Supply & Demand
Cold weather, global conflicts, fuel shortages, or unexpected demand spikes all increase energy prices. Conversely, mild weather and strong reserves can bring prices down.

3. Political and Geopolitical Events
One of the most significant factors in recent years has been geopolitics. Events like the war in Ukraine, international sanctions, and political instability in major producing countries can disrupt supply chains and spike prices. Energy markets are global – so events overseas can quickly impact prices in the UK.

4. Policy and Regulation
New taxes, levies (like CfD or RO), and regulatory shifts can affect prices, especially in renewable obligations or environmental charges. Government subsidies or the removal of price caps also influence market conditions.

5. Infrastructure Costs
Distribution and transmission charges, network maintenance, and losses all factor into your final unit rate.

6. Currency Fluctuations
Energy is traded in dollars, meaning shifts in the pound-dollar exchange rate can impact UK prices.

7. Environmental & Renewable Shifts
More renewable generation on the grid can reduce reliance on fossil fuels, but intermittent sources like wind and solar can also cause price volatility.

Takeaway
Timing is everything. At Utiliplus, we monitor all of these factors, including political risks, to help you choose the right contract at the right time.