On the 29th of March, the House of Commons Library released a research briefing document titled “Rising cost of living in the UK” This 38 page document outlines some of the reasons for the increases in living costs seen throughout the UK, and how inflation reached a 30 year high in February of 2022.
This document also states the governments support for household expenses, in terms of the £150 council tax rebate and the £200 energy bill discounts. But with no rise for those claiming benefits, and the energy bill discount needing to be paid back within five years, it paints a gloomy picture.
“Low-income households spend a larger proportion than average on energy and food, so will be more affected by price increases. The Resolution Foundation estimates that an extra 1.3 million people will fall into absolute poverty in 2023, including 500,000 children.”
Even before the Ukraine invasion, energy prices went up in the year previous to January 2022. Domestic gas by 28% and electricity by 19%. The government document explains “due in part to a return of global gas demand as pandemic restrictions are lifted and lower than normal production of natural gas”
Although Ukraine and Russia are not a substantial direct supplier of oil and gas to the UK, global prices for oil went above $100 per barrel immediately after the invasion, which is the highest level they have been since 2014. It peaked at $135 during the first week of March and has fluctuated quite wildly over the last few weeks to around the $120 per barrel today. In contrast, April 2020 just after the pandemic started, the price dropped from around $60 a barrel to less than $10 as everything and everyone shut down. Since then, the price has been climbing steadily higher month on month.
Since the Ukraine invasion, we have also found out that both Russia and Ukraine are some of the world’s largest producers and exporters of agricultural products including wheat and fertiliser.
The document goes on to state “As well as the military, political and humanitarian impact of Russia’s invasion of Ukraine, there will also be implications for the world economy. For the UK, the most likely economic effects will come through higher energy prices. Oil and gas prices on international markets have risen since the invasion. Petrol prices in the UK are already higher and energy bills may also rise (for businesses, as well as households). Some commentators have suggested that the household energy price cap will increase by 40-50% when it is next revised in October 2022, although there is a great deal of uncertainty given the volatility in natural gas prices”
For the full report you can follow the link below