Global Energy Inflation Hits U.K. Homes as Igloo Hikes Prices

(Bloomberg) -- British consumers are starting to feel the pinch from a rally in global energy markets, with supplier Igloo saying it will hike prices.

The cost of energy for a typical home buying natural gas and electricity will rise 12.1% from Aug. 2, Igloo said on its website. The move follows a surge in the wholesale price of gas and coal as economies emerge from the pandemic, boosting demand as businesses reopen and people return to the office.

Energy prices are soaring from the U.S. to Asia as economies recover and more people get vaccinated. Consumers in Europe are set to face hefty bills this coming winter, with countries like the U.K. raising the cap on how much utilities can charge consumers and Spain moving to cut energy taxes to help offset the burden from soaring electricity prices.

“People have returned to work, demand has increased and everyone is working overtime to catch up,” said Matt Clemow, chief executive officer and founder of Igloo. “We have now seen a return to pre-pandemic demand, which has put a strain on our already depleted energy reserves, pushing up wholesale costs.”

U.K. gas futures have already surged to the highest level in more than 15 years after a colder- and longer-than-usual winter left storage sites depleted. Benchmark European prices in the Netherlands jumped to a record as inventories are currently at the lowest level in more than a decade.

Supply isn't rising fast enough. Europe's top supplier Russia is flowing less gas to Europe through Ukraine -- a key transit route -- and No. 2 Norway is undergoing heavy maintenance after pandemic-induced delays. Asia is stocking up on cargoes of liquefied natural gas, leaving Europe facing a supply crunch.

Empty Tanks

“In previous years, warmer weather would normally result in lower wholesale prices as we switch off our heating and start to enjoy the British summer,” he said. “Unfortunately, with empty gas storage tanks across the globe, everyone is having to stock up to get ready for next winter.”

The cost of pollution permits has also surged this year, boosting energy prices in Europe and the U.K.

Other British energy suppliers are expected to follow suit and pass on costs to businesses and households this winter, when demand for heating peaks. The U.K.'s energy market regulator Ofgem earlier this year raised the cap on how much utilities can charge consumers by 9.2%.

“We recognize that it's been a tough year and we've done all we can to absorb this impact for as long as possible, but costs have continued to rise and we reluctantly need to increase our energy prices.”