Martin Lewis says energy has ‘started to get cheaper’ | Personal Finance | Finance
Martin Lewis has said that energy deals are already becoming cheaper in the wake of a deal between the US and Iran. The money-saving expert said earlier in the week that he expected prices to drop soon in some rare ‘good news’ for hard-pressed British homes regarding energy prices.
That was in the wake of an agreement announced between the US and Iran to end hostilities and reopen the vital Strait of Hormuz. The memorandum of understanding, which is now in effect, was signed on Wednesday by Donald Trump and Iranian president Masoud Pezeshkian.
That has seen the price of oil and natural gas drop, resulting in a fall in energy prices. At the time of writing, Brent crude has dropped by around $7 a barrel and UK natural gas by around 14 per cent.
Mr Lewis confirmed that fixed energy deals were already being offered that were some 5 per cent cheaper. He said: “Energy fixes have started to get cheaper, now 5% below April price cap.”
However, Mr Lewis warned earlier in the week that people should not expect a significant drop in the next price cap, which is from October to December. The next price cap is expected to be released on August 26 by energy regulator Ofgem.
Around 60 per cent of homes in England, Scotland, and Wales are on a standard variable tariff, meaning their price is controlled by the price cap. The current energy price cap is set to rise on July 1 by 13 per cent. That means that a household with typical energy usage paying by direct debit will pay £1,862 a year.
That represents an increase of £221 on the previous price cap – and MR Lewis warned it could go higher still, despite the end of hostilities.
He said: “The US and Iran signing a framework deal has pushed natural gas prices down. These wholesale prices are a key driver of UK gas and electricity bills. As the six-month graph shows, though, prices still have a long way to fall before returning to pre-conflict levels.
“The good news is that this could lead to slightly cheaper fixed tariffs being launched in the coming days. However, without substantial further drops the October price cap still looks likely to be significantly higher than it is today.”
He was later asked why he thought the price cap would rise from October. He answered: “It’s the same reason the energy Price Cap HASN’T yet risen due to the Middle East crisis. It is time-lagged. So slow to rise, slow to fall.”
