Are Consumers Benefiting From Falling Oil Prices?
Could the big six energy suppliers be in trouble, yet again, for failing to slash prices on energy bills despite the fall in oil prices?
The price of oil has dropped by 55% in the past six months, which could have a significant knock on effect on the wholesale cost for energy suppliers. Oil price hit a five-year low this week and have been steadily falling since June last year.
It has been estimated that the fall has caused a 20% reduction in wholesale prices, with the price of a barrel of Brent Crude oil dropping to below $50 this week. As discussed in our previous post, E.ON is thus far the only energy company to have voluntarily slashed their gas prices by 3.5% to offer a fairer deal to their customers due to the drop in wholesale energy costs. Yet there has been no sign of any of the other big six passing on these kind of savings.
If the energy suppliers are making significant savings due to this downfall, they should be passing on the goodwill to their consumers by cutting energy prices. You’d have thought so anyway.
Ofgem Should Enforce Cuts
Labour leader, Ed Miliband, informed Andrew Marr during an interview with the BBC that he believes that energy regulator Ofgem should be given the power to force suppliers to lower the price that consumers pay for their gas and electricity bills, to accurately reflect the wholesale price cut.
"We're going to bring before the House of Commons a vote in Parliament to say the government should bring forward fast-track legislation to ensure that we give the regulator...the power to cut prices," He told Andrew Marr.
Ofgem currently does not hold any power to enforce energy suppliers to change their prices, as a regulatory body they can only publicly state their dissatisfaction.
Savings are Being Passed On To Consumers
On the other side of the argument, Lawrence Slade, Chief Executive of Energy UK, claims that energy companies are indeed already passing on these savings to customers, so there’s no need to give Ofgem more authority.
"No new powers are needed. Energy suppliers are already passing on price cuts to customers. With over 25 suppliers in the market competitive pressure is forcing down prices every week. When people shop around they can easily find deals that are over a hundred pounds cheaper than this time last year and line with falls in the wholesale energy price part of energy bills," Mr Slade said.
He argues that many of the big energy companies use a tactic called “hedging” - where they purchase huge quantities of oil and gas in advance - which is why the consumer isn’t seeing the benefits of the drop in oil prices just yet.
Switching Suppliers for Savings
According to the latest Energy UK figures, 3.1 million customers switched suppliers in 2014, which is very encouraging.
The data revealed that 1.1 million customers switched from a large supplier to a smaller one. The figures represent the highest number of smaller switches since energy records began and is more than double the amount of switches to small companies in 2013, reiterating the fall of consumer confidence in the big six suppliers and the fact that people now realise they have far more choice.
Would you trust a smaller supplier to pass on the savings?
Switching is the easiest way to save money on your energy bills. Customers are now able to switch energy suppliers in half the time that it previously took, allowing them to change providers in 17 days as opposed to five weeks. Tariffs are falling all the time and with new regulations being introduced, it is easier than ever to switch suppliers and get the best deal.
Contact one of the experts at Love Energy Savings today, or use our comparison tool and see how easy it is to switch and save.