EU nations facing $113 billion rise in energy costs as VAT cuts take effect in the UK
EU nations are spending over $113bn more on energy, as Burnham pledges to scrap VAT on energy bills
European Union nations have spent more than $113.5 billion on energy imports since the Iran war began.
Listen to this article
European Union nations have spent more than an extra 100 billion euros ($113.5 billion) on energy imports since the outbreak of the Iran war, pushing politicians to seek alternatives to fossil fuels as prices skyrocket.
Following the closure of the Strait of Hormuz, the crucial waterway through which a fifth of the world’s traded oil passed in peacetime, oil and gas prices have skyrocketed across the globe.
Consumers in some European countries are now paying nearly 50% more at the petrol pump, equivalent to more than $11 a gallon, with UK motorists also facing £4.7 billion in additional road fuel costs.
Read more: Oil and gas prices climb after Saudi Arabia closes east-west pipeline
“Times are serious,” said EU energy commissioner Dan Jørgensen during a gathering in Dublin of energy ministers from across the 27-nation bloc.
EU ministers discussed plans to accelerate the shift from fossil fuels to electricity and expand electrical infrastructure across the bloc.
It comes after EU nations found themselves highly dependent on the U.S for direct energy imports after ending the historic reliance on Russia, following its full-scale invasion of Ukraine in 2022.
UK households and businesses are currently facing almost £10 billion in additional energy and fuel costs due to higher oil and gas prices since the start of the Iran conflict.
Energy bills are expected to see the biggest rise in four years.
Prices are set to soar in January, with a typical annual bill forecast to jump by £276.
The 16% predicted increase would hit millions of households at the coldest time of year, and would mark a record rise in the cost of living.
Speaking from the Labour conference in Liverpool yesterday, Prime Minister Andy Burnham warned the approaching winter could be ”very difficult indeed” for millions of households across the UK, particularly the almost 14 million people currently living below the poverty line.
He added: "We're looking at any measure that can give people breathing space, that can take the pressure off."
Burnham’s pledge to cut VAT on electricity bills is due to come into force tomorrow, which will reduce the average energy bill by around £45 annually.
However, about 20 million households in England, Scotland and Wales are on variable energy tariffs set by Ofgem's price cap, which puts a maximum price on each unit of gas and electricity.
Those homes will see a 4% increase in prices on Thursday, the equivalent of about £60 per year, taking an annual bill to £1,723 for the typical household using both electricity and gas.
Forecasts show a far greater increase is possible for bills in January, with a potential 16% rise hitting households at one of the most difficult times of year.
Cornwall Insight said its latest forecast suggests the typical annual bill would rise to £1,999.
Among those calling for government help for struggling billpayers is Simone Rossi, chief executive of supplier EDF Energy.
He said: "We are walking into a second significant energy crisis after the one we experienced just four years ago."
He said the government should extend the cut in VAT on electricity bills beyond April, when it is due to expire.
The government has consistently said it will consider ways to offer breathing space to billpayers on the cost of living.