Category: Forex News, News
Will gas and electricity bills fall in 2026? Energy price forecast
Energy prices are set to fall on 1 April when the new price cap comes into effect, but war in the Middle East could mean energy prices soar in the summer.
The new Ofgem energy price cap period will begin on 1 April, with energy bills for most households set to fall by 7%, the equivalent of £117 a year.
The cut comes after the government announced it would scrap some green levies from household bills in the Autumn Budget worth around £150.
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Where will energy prices go in April?
Gas and electricity bills will fall on 1 April as the new energy price cap will bring the annual average energy bill for a dual-fuel household paying for their energy by direct debit to £1,641.
That is a saving of £117 per year when compared to the current January to March price cap of £1,758 – but remember, the cap is a cap on unit prices, not your total bill, so your actual bill is determined by what you use.
Bills have been able to fall in April after the government said it will remove some environmental levies that fund eco schemes that add to costs for households.
The government said the majority of households in the UK will benefit from the policy and the savings will apply to all tariffs, including variable tariffs, fixed tariffs, tracker tariffs and time-of-use tariffs.
The savings will come despite an overall increase to the cost of servicing the UK’s energy infrastructure that was set to increase bills by around £57 had the government not stepped in.
Lower bills will be welcomed by households in the second quarter of the year, but how long will the savings last?
Where will energy prices go from July onwards?
Ofgem, the energy regulator,will confirm the next price cap, covering the July to September period, by 27 May. It is widely expected to announce an increase in prices.
Cornwall Insight, an energy consultancy well-regarded for the accuracy of its price cap predictions, expects the July price cap to rise to £1,972 – an increase of around £331, or 20%.
Before the current conflict, Cornwall Insight expected the July price cap to be £1,645.
The reason for the rise is that the global energy market has been thrown into turmoil following the joint US and Israeli strikes on Iran on 28 February, which led to increased hostilities in the Middle East, where a significant proportion of the world’s oil comes from.
In particular, the conflict has led to Iran closing the Strait of Hormuz, a narrow naval passageway between the coasts of Iran and Oman through which around 20% of the world’s oil is transported.
Since the beginning of the conflict very few ships have managed to safely pass through the strait, pushing up global oil prices. The price of a barrel of Brent crude oil was around $70 before the conflict – it is now north of $100.
Increases to the cost of oil have major knock-on effects on the prices of many other commodities which are produced using oil.
For example, the price of a litre of petrol has increased by 10.5p since the conflict, while the price of heating oil has more than doubled.
The supply of liquified natural gas (LNG), which makes up around 33% of the UK’s energy supply and is mainly imported, has also risen significantly since the start of the conflict.
Ofgem calculates the price cap by observing the average wholesale price of energy over a three-month period, and as this period will include spiking prices due to the war, we can expect the price cap to increase.
Craig Lowrey, principal consultant at Cornwall Insight, said: “The latest forecast puts the role of wholesale markets firmly back in the spotlight and illustrates how exposed UK households remain to international market movements.
“While the rise is eye‑catching, any immediate concern should be tempered. We are still early in the assessment period for the July cap, and what happens in the energy markets over the next three months will be the key factor, rather than this spike alone.”
Other forecasters have similar predictions.
Economists at the Bank of England (BoE) expect household energy prices to increase in the summer when the July price cap kicks in, helping push inflation to 3.5% in the third quarter of 2026.
The BoE used these forecasts to help inform its decision to hold interest rates at 3.75% at the most recent meeting of ratesetters at the Monetary Policy Committee.
EDF Energy expects the price cap will rise £217 on 1 July, from £1,641 to £1,858. This prediction comes in £112 higher than predictions before the conflict. It says prices could rise again in October, to £1,919, and start 2027 at £1,928.
Meanwhile, Economists at consultancy Oxford Economics expect the price cap to rise by 19% in July.
How to get help with paying your energy bills
If you’re struggling to afford your energy bills, your energy supplier may offer support with hardship grants. Octopus Energy has Octo Assist and British Gas has the British Gas Energy Trust.
You may be able to get a repayment holiday. This is where you ask your supplier to pause your repayments for a short amount of time to give you some breathing space.
Another option is to agree to an affordable payment plan. You will pay fixed amounts over a set period of time, which will cover what you owe plus an amount for your current use.
If you are on benefits, you might be able to repay your debt directly from your benefits through the Fuel Direct Scheme.
According to Citizens Advice, the Fuel Direct Scheme can be a good option if you can’t agree on a plan to pay back your debt, and it’s usually better than getting a prepayment meter.
Additionally, some government schemes give some households money towards paying their energy bills.
The Warm Home Discount is offered to households in receipt of some means-tested benefits who use participating energy suppliers and provides £150 of credit that is automatically paid towards your energy bill.
Meanwhile, if you are a pensioner with an income of £35,000 or less, you will be eligible for the Winter Fuel Payment, which provides retirees with up to £300 each winter.
To help you keep energy bills low, we have gathered some top tips in our article looking at 14 ways to reduce your energy costs.
Where will heating oil prices go after recent eye-watering price hikes?
Some households in Britain are facing the prospect of an over 100% rise to the cost of heating their homes after the Iran war has led to a surge in the price of heating oil.
Disruptions to the supply of oil, which heating oil is derived from, have meant the price of the fuel increased from around 60p per litre on 28 February to more than £1.31 per litre on 20 March.
Households reliant on heating oil are not protected by a regulator in the same way mains customers are protected by the price cap, making them more sensitive to market forces.
For this reason it is especially difficult to predict where the price of heating oil will go in the future as no cap is agreed-upon in advance.
This being said, one way to get a rough idea of where the price of heating oil may go in the future is by looking at where the wider oil market will go.
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