With household energy costs falling throughout 2015, you may be wondering what’s in store for your energy bill in the upcoming year. Since commodity prices are notoriously volatile, making accurate short term predictions are particularly difficult, however there are a few factors you can look at that can give an indication of what the cost of energy might be in 2016.
Gas and Oil Prices
The price of fossil fuels, such as coal, gas and oil, can have a big impact on household energy expenses as wholesale energy costs make up around half your energy bill. These prices often fluctuate on both a global and European scale, and can therefore result in a rise in costs for energy companies which could be passed on to the consumer.
However, due to the oversupply of oil in 2015, prices have subsequently dropped. In light of the recent collapse in oil prices over the past year, those on variable tariffs could notice a further reduction in their energy costs during 2016. However, those on fixed tariffs may have to wait until the end of their energy contract before they notice any changes.
Like all economic goods, the price of energy is heavily dependent on demand. Although demand shouldn’t dramatically increase in a year, the long term effects of an increasing global population are predicted to see a 35% increase in demand for energy by 2040, which suggests energy prices may rise in the future.
With the Government under pressure to meet its target to cut carbon emissions by at least 80% by 2050, it is expected that 2016 will see further investment into renewable energy resources. Initially, investment in renewables may see the added cost of investment passed on to the consumer through higher energy bills. However, households may see their energy costs fall in the long term due to reduced dependency on fossil fuels and the fact that once renewable energy generators are set up, they’re cheaper to run.
Tariffs and Suppliers
One of the quickest ways to reduce the cost of your energy bill for 2016 is to check you’re on the cheapest tariff available and if not, look into switching energy suppliers. With electricity prices currently relatively low compared to previous years, you could take advantage of the cheaper prices by choosing a fixed tariff. You can save up to £200 on your energy bill simply by switching your energy supplier. If you’ve never switched before, and with the low tariffs currently available, now is a smart time to switch.
Finally, cutting your household energy usage is the most effective way to keep control of your energy costs heading into the new year. From simply breaking a few bad energy habits at the start of the year to investing in insulating your home, becoming more energy efficient will regulate how much your household energy will cost in 2016.