Martin Lewis has mentioned that energy prices are already showing signs of becoming more affordable following a recent agreement between the US and Iran. The renowned money-saving expert recently predicted a forthcoming drop in prices, bringing some positive news for financially strained British households grappling with energy expenses.
The decrease in energy costs follows the announcement of a pact between the US and Iran to halt conflicts and reopen the vital Strait of Hormuz. This agreement, now in effect, was signed by Donald Trump and Iranian president Masoud Pezeshkian on Wednesday.
As a result of the decline in oil and natural gas prices, energy prices have also seen a reduction. Brent crude prices have dropped by approximately $7 per barrel, and UK natural gas prices have fallen by around 14%.
Martin Lewis confirmed that fixed energy deals offering around a 5% discount are already emerging in the market. He noted, “Energy fixes are starting to become more affordable, now 5% below the April price cap.”
However, Lewis cautioned that a significant reduction in the next price cap, effective from October to December, should not be anticipated.
The energy regulator Ofgem is set to announce the next price cap on August 26. About 60% of households in England, Scotland, and Wales are on a standard variable tariff, subject to the price cap.
The current energy price cap is scheduled to increase by 13% on July 1, resulting in an annual charge of £1,862 for a home with average energy consumption paying via direct debit. This marks a £221 increase compared to the previous price cap, with the potential for further increases despite the recent peace agreement.
Lewis explained, “The recent framework deal between the US and Iran has led to a decline in natural gas prices, which influence UK gas and electricity bills. Although prices have decreased, they still have a way to go to return to pre-conflict levels.”
He added, “While this could bring about slightly cheaper fixed tariffs soon, significant price drops are needed to prevent a considerable increase in the October price cap.”
When asked about his prediction of a price cap increase in October, Lewis highlighted the time lag effect in price adjustments due to international events, stating, “It’s the same reason the energy Price Cap hasn’t yet risen due to the Middle East crisis. It is time-lagged, slow to rise and slow to fall.”
