What Has An Effect On Energy Prices?
The most obvious cause of rising energy costs is the soaring costs of raw materials such as crude oil and natural gas. These are affected by natural scarcity, political upheavals and global demand. In particular, the depletion of Britain's stocks of north-sea fuels has led to the country becoming a net importer of gas, raising prices for all forms of energy because a large proportion of electricity generated in the U.K. is made using gas-burning power stations. Crude oil is also rapidly increasing in price as demand from developing countries outstrips the growth in developed fields, and upheavals in Arab countries affect access to supplies in those areas.
Energy prices can fluctuate very quickly, and any event that has an impact on the production or consumption of fuel can affect them. For example, not only did the Japanese disaster of 2011 interfere with global fuel supplies because of the Japanese people's greater need for imported energy, the breaches in their nuclear power system have raised doubts about the viability of the nuclear option for fuel generation, resulting in even more demand for fossil fuels, increased costs, and raised prices.
Energy companies are finally being forced by legislation and public opinion to consider the environmental impact of their actions, and to correct and repair any damage done where possible, as well as introducing measures to improve their environmental impact and reduce carbon emissions. While in many ways this is a positive development, the expense involved in dealing with these costs, which were previously passed on to taxpayers in general (in terms of environmental clean-up) or individuals (in the case of health issues caused by pollution), are now being passed directly to customers of the energy companies.
Improvements to infrastructure
About one-fifth of the current cost of domestic and business fuel bills consists of network charges. The ageing nature of the U.K.'s energy systems means that these costs are likely to rise significantly as replacements and improvements are required to handle ever-increasing demands for energy. Some of the environmental costs mentioned previously will be covered by this work, but a great deal of maintenance is needed simply to maintain current levels of supply.
The main energy companies have been criticised by their regulator, Ofgem, for maintaining a high price level for domestic energy and business electricity and energy, by using a combination of poor tariffs, complex agreements and general poor business practice in terms of customer choice and handling transfers. While there are some genuine global reasons for rising energy prices, energy companies are responsible for the end price to the user, and in this sense, have the main responsibility for affecting energy prices on a daily basis.
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