Households are facing a fresh cost-of-living blow, with annual energy bills at risk of surging by as much as £500 – within months.
A stark warning from the Resolution Foundation suggests that Britain could be heading for another energy price shock driven by global conflict and soaring fuel costs. The think tank said prolonged spikes in gas markets could push Ofgem’s price cap sharply higher from July – wiping out recent relief and piling pressure back onto millions of families.
It warned: “Prolonged highs in gas prices could push up the price cap by around £500 in July.”
Global turmoil fuels fresh bill fears
The renewed threat comes after instability in the Middle East sent oil prices jumping from around $70 to $100 a barrel, while wholesale gas prices have surged by more than 60%.
That has already begun feeding through to UK costs, with petrol rising from roughly £1.32 to £1.40 per litre in March alone – and expected to climb further.
But analysts say the real pain will hit households through energy bills rather than at the pumps. Even after April’s expected drop, bills are still 17% higher – or £236 more – in real terms than in 2020, underlining how little ground has been recovered since the last crisis.
£2,500 bills not ruled out
The Resolution Foundation warned that if wholesale prices stay elevated, the typical annual bill could rise dramatically again.
- A moderate increase could add around £230
- A sustained spike could mean a £500 jump
- In a worst-case scenario, bills could approach £2,500 a year
That would put costs back into territory where emergency Government support was previously needed.
Why petrol cuts won’t help most families
Despite rising fuel prices, the report dismisses calls to cut Fuel Duty as a distraction. It argues such moves would disproportionately benefit better-off households, who spend more on petrol, while doing little to ease pressure on the poorest.
Lower-income households spend far more on energy than transport – in some cases almost four times as much – meaning help must be targeted at bills, not the forecourt.
Millions shielded – but many still exposed
Around 40% of households are now on fixed tariffs, offering some protection from immediate price rises – four times the level seen during the 2022 crisis. But millions remain on standard variable tariffs and will be directly exposed to any increase in the price cap from July.
Call for targeted help – not blanket handouts
The think tank is urging ministers to avoid costly, across-the-board subsidies and instead focus on those most in need.
It said: “The government should use the time between now and then to think smartly about how support can target vulnerable families with lower incomes and high energy needs.”
A key proposal is a so-called “social tariff”, offering discounted energy rates for lower-income households with high usage.
The report says: “A discounted price for low-income families (sometimes known as a social tariff) is the right instrument to achieve this.”
It adds that such a system would be more effective than previous schemes because: “It delivers greater support to households that use more energy and can exclude those on higher incomes.”
Crucially, it could also avoid wasting money on households already shielded from rising costs, noting it can: “avoid unnecessarily supporting the four-in-ten households on fixed tariffs.”
By contrast, earlier interventions were criticised for being too broad. The report says: “Previous schemes… provided blanket support to households, regardless of incomes.”
And it makes clear that, if a social tariff cannot be introduced in time, alternatives are second best: “Removing some policy costs combined with uprating Universal Credit is the best fallback… but it remains a poor substitute.”
Pressure mounts on ministers
With the Government already under strain over the cost of living, the report warns there is still time to act – but only if preparations begin now. Energy bills are not expected to rise until July at the earliest, and usage is typically lower over summer, buying ministers a narrow window to intervene.
But failure to act could leave households facing yet another financial squeeze just as winter approaches. The Resolution Foundation said a targeted approach is crucial – warning that without it, billions could be spent with too little reaching those who need it most.