Under new plans, the energy price cap is to be adjusted every three months rather than every half-year. Ofgem maintain that this will ease pressure on the cost of living as it will allow consumers to benefit more quickly from falls in the price of wholesale energy, which have been extraordinarily volatile over the last couple of years. While the energy price cap rose 54% in April, it is set for around a further 40% increase in September as households continue to grapple with the cost of living.Sticking with UK energy, UK gas prices have seen a fall after Liquified Natural Gas (LNG) deliveries have helped alleviate supply shortages. This has assisted UK gas prices dropping some 13% since the start of 2022. However, The Telegraph are reporting that a number of LNG imports coming into the UK have been turned away from the National Grid because of a lack of storage space. National Grid is also saying that maintenance work will hinder the ability for the UK to take gas shipments – much of which were then set to go to countries including Germany. As such, the likelihood is that the Grid will have to pay compensation fees to gas companies which have existing contracts.
Earlier this year, the National Grid sold a 60% stake of its gas pipeline network to the Australian financial services group Macquarie for £4.2bn. The deal (which comprises of £2.2bn in cash and £2bn in debt financing), was criticised by many analysts who cited Macquarie’s poor management of Thames Water which it sold in 2016 with an extra £2bn in debt.
Sticking with energy, WTI Crude Oil has fallen around 1.25% while Brent has dropped over 1.5% in the last 24hours after investors continue to consider the impact of China’s lockdowns on global oil demand.
India Bans Wheat Exports
Global wheat prices – already exacerbated by the conflict in Ukraine – have been driver further by India administering an export ban which subsequently saw the Chicago index rose 5.9%. India’s ban comes after a heatwave has been significantly reducing crop yields and as such domestic supply has taken a serious hit. India is the second largest producer of wheat, however given the size of the domestic market, last year it ranked 10th on wheat exporters by country falling behind Romania and Germany. Generally speaking, much of India’s wheat heads to countries included Bangladesh, South Korea, Sri Lanka, Oman and Qatar and as such each of these will be considering the impact of India’s ban on their food security.
Economists Warn over Brexit Implications
An open letter from 58 economists has been delivered to the Chancellor, warning that government’s post-Brexit plans threaten to undermine the stability of the UK financial system, which could have severe consequences on that of the global financial system. The list of economists included Vince Cable and Nobel Prize winner Joseph Stiglitz who expressed concerns that cutting City regulation as part of the government’s “Brexit freedoms” agenda could risk prioritising competitiveness at all costs and lead to a lack of oversight by the regulators. Such a situation, they warned, could see a recurrence of the environment which led to the global financial crash.
The Week Ahead
This week’s primary economic data sees the release of UK unemployment data tomorrow morning where the general market consensus indicates that it will remain unchanged at 3.8%. Tomorrow will also see the release of Eurozone GDP for Q1 (expected at 5%) and US retail sales. On Wednesday, all eyes will be on UK inflation data, where the market is predicting an annualised CPI print of 9.1% – a significant increase from last month’s figure of 7%.
Have a great day.