Chancellor Announces Support for Households Facing Heating Oil Price Surge
Chancellor Rachel Reeves is set to introduce a support package for households struggling with increased heating oil costs, a consequence of the global repercussions of the US-Israel conflict in Iran.
In an interview with the Times, Reeves stated that she has
"found the money"to assist those affected. She also mentioned that the Treasury is exploring
"different options"to aid the most vulnerable groups facing soaring energy bills.
Impact of Global Oil Price Increase on Heating Oil
The rise in global oil prices has led to a significant increase in heating oil costs, which is a common heating source in rural areas not connected to the main gas grid. Notably, heating oil prices are not regulated by Ofgem's energy price cap, which is scheduled to decrease in April. The government is expected to announce the support package early next week.
A government spokesperson affirmed that Reeves would make the necessary decisions to support families with the cost of living challenges while safeguarding public finances.
Approximately 1.7 million households in England and Wales depend on kerosene for heating and hot water. Unlike gas and electricity, kerosene prices are uncapped and subject to market volatility.
Since the onset of the US and Israel's military actions in Iran, households relying on heating oil have experienced their bills doubling, order cancellations, and in some cases, an inability to obtain heating oil altogether.
Government Response and Future Plans
Reeves explained to the Times,
"We've worked through with MPs and others a response for people who are not protected by the energy price cap."
Regarding gas and electricity bills, the chancellor indicated that ahead of the next price cap review in July, the government is evaluating
"different scenarios"and considering
"more targeted options".
Ofgem has previously announced that household energy bills are expected to decrease by 7% in April following government reforms in charging structures.
Despite this, prices remain approximately one-third higher than before the conflict in Ukraine, and the number of billpayers in debt has increased significantly.
With the Middle East conflict ongoing, gas and electricity bills could face substantial increases from July after Ofgem's price cap is lifted, driven by rising wholesale gas prices.
Ministerial Engagement with Petrol Retailers
Reeves's remarks followed a meeting between ministers and petrol retailers on Friday, prompted by oil cost increases pushing prices to an 18-month high.
The Petrol Retailers Association (PRA) dismissed ministerial allegations of
"price gouging"and briefly threatened to withdraw from the discussions.
Prior to the meeting, Energy Secretary Ed Miliband expressed concern, stating he and the chancellor were
"really concerned"about developments in parts of the market. He noted that the Competition and Markets Authority (CMA) had raised concerns in December.
Miliband confirmed that he and Reeves met with the CMA earlier in the week to specifically address heating oil and motor fuel issues.
Fuel duty, currently frozen, is scheduled to increase in September; however, Miliband has confirmed that this is now under review.
Political Reactions
Conservative leader Kemi Badenoch has urged Chancellor Reeves to cancel the planned fuel duty increase and called for the UK to
"start drilling"for oil in the North Sea.
