No let-up yet for household energy bills as oil resumes ascent
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There's no let-up in sight for increases in household heating bills in the early winter months, as global oil prices resumed their ascent on Monday, analysts at home and abroad have warned.
Household utility bills started to rise sharply in recent weeks amid an unusual mix of shortages of European gas that is widely used to generate electricity. Global crude prices have also surged as the Opec and its oil producing allies seek to tap more revenues following the collapse of the price of crude during the worst of the Covid crisis last year.
After easing last week, crude oil prices resumed their ascent on Monday as expectations of strong demand and a belief that producers will not turn on the taps too fast helped reverse initial losses caused by the release of fuel reserves by China, the world's biggest energy consumer.
Brent crude – the global benchmark – rose 1.5%, to almost $85 a barrel. Crude price hikes in previous weeks will flow first into higher costs at the petrol pumps and will help push up prices for all types of businesses, if they are sustained.
"Fundamentals have not changed, and the oil market will remain tight in the near-term," said Stephen Brennock of oil brokerage PVM Oil.
For Irish households, there is more pain on the way, said Eoin Clarke, managing director of comparison price website Switcher.ie, referring to a price hike announced by Pinergy, the latest of many Irish energy retail suppliers to announce price rises.
“We are seeing unprecedented price hikes for energy customers across Ireland this year. This huge 19% rise from Pinergy follows on from other energy suppliers announcing similar price climbs in recent months," Mr Clarke said.
Energy price hikes are helping to push prices up of all types of products. Price inflation is being made worse by the widespread supply chain bottlenecks that have blocked international ports as companies struggle to recover from the Covid crisis.
Andrew Hunter, senior US economist at Capital Economics, said there was no let up in sight in the US to the "worsening labour and materials shortages across virtually every sector". Surveys suggested that headline consumer price inflation was continuing to run at close to 5%.
Speaking to reporters in Dublin on Monday, US Treasury Secretary Janet Yellen said the US economy was not overheating.
On the spike in US inflation and referring to global supply chain bottlenecks, Ms Yellen said it was "transitory" and was related to the pandemic.
Economists are beginning to question whether central banks will be able to hold the line on interest rates should energy price hikes mean price inflation becomes widespread in the global economy for the first time in many decades.
The ECB has kept interest rates at rock bottom levels which has in turn put a cap on Irish mortgages and business loans. However, the Bank of England could hike UK rates as early as this week.