The DESNZ forecast (from the Department for Energy Security and Net Zero, under Ed Miliband’s department) of plunging wholesale gas prices over the coming years- around a 15% drop from 2024 levels by the end of the decade, continuing downward through to 2035 in the central scenario, and potentially halving in the most optimistic case- has significant but mixed implications for UK household energy bills.

Energy forecasts are volatile- past ones have missed geopolitical shocks, demand shifts, or supply changes.

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From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

h/t Ian Cunningham

Readers of Notalot won’t be surprised this news!

From the Telegraph:

Ed Miliband’s civil servants have predicted a decade or more of falling gas prices, undermining Labour’s key argument for ditching fossil fuels.

A global glut of gas is set to bring prices down for years to come, according to a report from the Department for Energy Security and Net Zero (Desnz).

The paper, titled “Fossil Fuel Price Assumptions”, estimates prices to 2035. Its findings suggest that a shift to renewables could be more expensive than sticking with gas. Moving to sources such as wind and solar threatens to lock in the UK’s already-high energy prices for years to come.

The findings are embarrassing for Mr Miliband, who has insisted that switching to renewables is vital for bringing down bills and for energy security.

Mr Miliband told a recent conference that the surge in energy prices seen after Russia’s invasion of Ukraine showed that the “UK’s dependence on fossil fuels leaves us deeply vulnerable as a country”.

He added: “As long as we are dependent on fossil fuels, no matter where they come from, we will be stuck on the roller-coaster of volatile international markets … in the grip of dictators and petrostates.”

The UK gets most of its gas imports from Norway and America.

The Desnz report predicted that gas prices will fall by around 15pc between 2024 and the end of the decade. Officials expect prices to continue to fall up to 2035 under what it sees as the most likely scenario.

Mr Miliband’s staff based their assumptions on a huge, predicted increase in production of liquefied natural gas (LNG).

Full story here.

In fact, DESNZ were forecasting similar falls a year ago. It does not need a degree in rocket science to work out why.

It is all a simple matter of supply and demand. Prices spiked when the Ukraine war disrupted supplies. As a result, the high prices incentivised new supply – in particular by investing in LNG terminals.

As supply increases, prices return to normal – in other words, back to pre 2020 levels in real terms.

Miliband must have known about this for a long time, so the damage he is doing to the economy and the country is deliberate.

Below are the DESNZ projections, all at 2024 prices. Column B is the central case: