Wholesale prices – what energy providers pay for gas and electricity – continue to fall and 'remain very low', which some experts say could result in price cuts for households.
Wholesale gas prices have fallen by 29% over the last year, while wholesale electricity prices are down 16% over the same time period, according to Mark Todd from Energyhelpline. He adds that wholesale prices have also fallen slightly over the past month.
Oil prices, which tend to follow the same trend as wholesale energy prices, have also dropped over the last few months. Brent crude is down $4 at $50 today.
Falling energy wholesale prices coupled with British Gas's 5% cut to gas prices taking effect last week is likely to mean other providers follow suit and cut household energy prices, says Todd.
The Competitions & Markets Authority recently stating that standard tariffs are too pricey may also pile on the pressure for price cuts, says Ann Robinson, director of consumer policy at uSwitch.com.
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So what do energy experts predict will happen to prices?
No-one has a crystal ball, but here's what energy experts predict will happen to prices:
Mark Todd, energy expert at Energyhelpline.com, says:
"Oil prices tend to follow the same trends as gas prices as they have similar supply and demand conditions, however there's no direct link between the two. It's wholesale gas and electricity prices that are key to establishing household energy price trends.
"We've seen a gas price cut of 5% so far this summer from British Gas. So I'd expect further small price cuts from other suppliers in the short-term as wholesale prices remain very low. Don't expect anything big though, i.e. 10%+ or much off electricity.
"The next few years is more tricky to predict. The long term trend has been sharply upwards over the last decade with prices roughly doubling. The current environment though looks benign and would lead me to predict a fairly flat to falling market, but seeing a return to price rises (5%-10%) over the next two to three years.
"Why some price rises? Well, wholesale prices are likely to start rising again at some point from the current trough we are in and as we all know when they rise prices do tend to follow fairly quickly."
Ann Robinson, director of consumer policy at uSwitch.com, says:
"Over the next year there are no signs that wholesale prices – which make up around half of bills – will increase. In fact, with gas prices tending to follow global oil prices, the Chinese economy slowing its growth and the ongoing economic problems in the Eurozone, there could even be further falls.
"In addition, given the provisional findings from the Competition and Markets Authority (CMA) that standard variable tariffs are overpriced, energy suppliers will be under even more pressure to cut prices.
"Further ahead is more difficult to judge. We could well see some of the potential remedies coming from the CMA beginning to increase the numbers of us switching, which would put added pressure on suppliers to cut prices. It's also possible that the Government will reduce its so called green levies, which would be reflected in lower bills."
Stephen Murray, energy expert at MoneySupermarket.com, says:
"If 2014/2015 has taught us anything it is that predicting energy prices is tricky. Upheaval in both Ukraine and the Middle East might have been expected to inflate wholesale costs rather than delivering record lows.
"However, oil prices continue to fall with an over-supply in the market and gas prices have historically been linked to oil prices in world commodities markets, thus bringing wholesale gas prices down.
"But what do wholesale prices mean to me as a consumer? Well, most of the suppliers, particularly the larger ones buy their energy in bulk in advance and then charge it to us as consumers at a profit. So any bulk buying they are doing now will be cheaper and so they should be able to pass price decreases on in future months."
Ben Wetherall, head of gas at energy reporting consultancy ICIS, says:
"There is an expectation that wholesale prices will remain lower for the rest of the year. Discounting any unforeseen events that may cause global energy prices to increase, in a competitive market like the UK we're expecting there to be continued pressure for wholesale energy prices to stay lower throughout 2016.
"However, energy companies purchase gas on the wholesale market months and years in advance as well as on nearer term contracts, which helps them manage price volatility. It also means changes in wholesale prices may not be immediately passed on to customers, although prices have generally been softening for the past two years.
"It also has to be remembered that while the wholesale price remains the largest component of a standard household gas bill, non-energy related factors such as transportation and green costs are an increasing part of the overall bill, and there are no signs yet of these falling significantly."
Don't wait for prices to fall, act now to cut costs
However, don't wait for prices to fall. Standard energy prices for someone on a dual fuel tariff with typical usage are around £1,095/year. But you could save hundreds each year just by switching to the current market leading tariff.
So, you should:
- Do a price comparison via our free Cheap Energy Club (which also gives up to £30 cashback if you switch) to see if you can save.
- If possible, pay by monthly direct debit, and give your provider regular meter readings to keep bills accurate.
- Check if you can cut your usage using our Free Insulation and Energy Mythbusting guides.
Additional reporting by Helen Knapman.