Why aren’t gas suppliers passing on their savings?

Wholesale energy prices have only been going in one direction recently, downwards. As large oil producing nations Russia and Iraq post record breaking levels of output, energy supplier’s costs have tumbled. These savings though, have not yet been passed onto consumers in the form of lower prices. There are signs, however, that frugal energy shoppers can find better prices on their energy.

This week, politicians from across the political spectrum have been investigating why energy bills are not decreasing alongside supply costs. The price of a barrel of Brent Crude oil dropped below the significant $50 benchmark earlier this month sparking fresh demand for lower prices. The Chancellor, George Osborne launched a Treasury investigation into whether firms are passing on the benefits to consumers of plunging oil and gas prices.

Likewise, the leader of the opposition, Ed Miliband called for new Ofgem regulatory powers to ensure ‘immediate relief’ for consumers. In a BBC interview Mr Miliband proclaimed “We see wholesale costs go down 20% in gas prices over the last year and no reduction in bills.”

So far though, neither party has been successful in securing a better deal for energy users.

Get a better gas deal

There are signs though, that by shopping around, energy customers can find a better deal. Much of the political rhetoric about prices is targeted at the ‘big-six’  firms who typically, are the slowest to react when wholesale costs fall. This is because they tend to buy up large reserves of oil and gas at higher prices, meaning that it takes longer for their prices to fall.

Smaller suppliers, who carry lower reserves, should theoretically be quicker to pass savings on to consumers. This might be taken as one of the reasons that independent suppliers have managed to increase their market share from negligible up to 8% in recent years.

While larger suppliers continue to snub politicians and their calls for customer price cuts, there is already evidence to show that independent suppliers are reacting to reduced supply-side costs with lower prices.

At BusinessGas.com, we help save businesses money on their energy bills by working with a wide range of gas suppliers. Moreopver, by working the gas markets to our (and your) advantage. And if you use a large amount of gas, you may be elegible to join our buying group.