Energy bills set to hit £3,000 and petrol could reach £1.70 a litre due to Russia crisis

25 February 2022, 10:40

Hard-pressed Britons are facing massive extra hikes in the cost of living due to the Russian invasion of Ukraine.

Already reeling from the biggest cost of living squeeze in a generation, experts warned Brits face average household bills of £3,000 this year and petrol could top £1.70 a litre after the price of oil passed £100 a barrel.

And there are fears that the extra costs could fuel runaway inflation, narrowing further household budgets and forcing central banks to put up interest rates.

Russia and Ukraine export more than a quarter of world wheat and 80 per cent of sunflower seeds, used for cooking oil.  

The move saw one economist predict that, if the jumps in oil, gas and electricity products on Thursday are sustained, it could push inflation to 8.2 per cent in April - and would only fall back to 6.5 per cent by the end of 2022.

Fighting could also wreck crops and it is estimated that rising agricultural prices would add 0.2 to 0.4 percentage points to the rise in the cost of living, which is already expected to hit 7.25 per cent in April.

Savings and pensions will also suffer. Yesterday £89.7billion was wiped off stocks in London as the FTSE 100 index of Britain's biggest companies fell by 3.9 per cent. That will squeeze the investments of anyone with shares in their pensions and ISAs.

Wholesale gas prices spiked 40 per cent, fuelling fears that millions face two massive increases in energy bills. The average bill for a typical household is due to rise by £700 to just under £2,000 in April, but analysts suggest there could now be a second increase of £1,000 in October.

Europe is reliant on gas from Russia and any interruption to supplies as the result of conflict or sanctions is expected to drive up global prices.

Britain gets less than 3 per cent of its gas from Russia, but any rise in the global price will push up the figure for UK homnes and businesses.

At one point yesterday the oil price reached $105.79. This week, unleaded hit a new record of nearly 149.5p a litre and diesel almost 153p.

Ministers said they will monitor and offer support as required if the full-scale invasion of Ukraine by Russia leads to a surge in global food prices.

Ukraine is a major supplier of wheat and corn, with economists warning the cost-of-living crisis in the UK could be exacerbated with inflation rising well beyond current predictions of around 7% later this year.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said if the jumps in oil, gas and electricity products on Thursday are sustained, it could push inflation to 8.2 per cent in April.It would only fall back to 6.5 per cent by the end of the year, he added.

Mr Tombs said: "The surge in oil, natural gas and electricity prices, if sustained, points to an extra 1.5pp boost to the UK CPI. 'CPI inflation now likely to peak at circa 8.2 per cent in April and only come down to 6.5 per cent by the end of the year. Hard to see how households' real spending keeps rising."