The Department for Energy Security and Net Zero (DESNZ) said gas prices are determined on international markets, dismissing criticism of the UK’s own low levels of storage.
The boss of British Gas owner Centrica, Chris O’Shea, has repeatedly called for support from the government to expand its Rough storage facility in the North Sea, warning it has been unviable to fill it up and that it will close next year without a deal.
“We have almost no gas in storage in the UK for the coming winter and this is a huge concern as energy security is national security,” he said on LinkedIn, external last week.
A DESNZ spokesman said: “We remain open to discussing proposals on all gas storage sites, as long as it provides value for money for taxpayers.”
The department also pointed to Prime Minister Andy Burnham’s pledge to cut VAT from energy bills from October, as well as government action to reduce Britain’s reliance on natural gas altogether.
Ángel Talavera, chief European economist at Oxford Economics, said there is a “glass half full, and a glass half empty” picture unfolding.
On one hand, wholesale gas prices are significantly lower than during the crisis which followed Russia’s full-scale invasion of Ukraine.
On the other, households and businesses will still face significantly higher energy bills than usual over the coming months.
“It’s serious, but not catastrophic,” he told the BBC, adding “something would have to dramatically change to lower prices”.
He pointed to a reduction in demand for natural gas in general as a result of the shift towards renewables, but said the overall picture depends hugely on the winter weather.
“If you have a warmer winter than average, that will be great for demand,” he said. But he warned a colder than average winter would have the opposite effect, driving up demand for energy and pushing up prices.
It is not known how the developing El Niño over the Pacific Ocean will impact Britain’s winter. The so-called Big Freeze of winter 2009-10 was, at the time, the coldest in three decades – and this coincided with an El Niño.
However, 2006-07 was also an El Niño winter and that was unseasonably warm.
Talavera said gas prices could come down if the weather helps reduce demand and the Strait of Hormuz reopens sooner than expected.
But, at the moment, “the weather machine remains our main hope”.
It comes as a recent spike in the UK government’s borrowing costs eased. After a sharp uptick on Tuesday, which took the yield on a 10-year bond – or gilt – to the highest level since 2008, it fell back slightly on Thursday.
Yields are hovering around 5.15%, however, which would still represent a post-2008 peak were it not for Tuesday’s jump.
