00:00Energy prices in the UK are set to rise by 13% in July.
00:05The country's energy regulator says the cap on bills has to go up
00:08due to the wholesale increase of oil and gas as a result of the Iran war.
00:13Liam Daly is Senior Economist at the Centre for Economics and Business Research.
00:18Liam, good to have you on the show.
00:20So, unwelcome news that is from the Energy Secretary Ed Miliband today.
00:24So, how exposed are British households to rising energy prices?
00:31Well, this rise that will be coming into place in the third quarter of the year
00:34will affect roughly 33 million households in the UK.
00:38While there are 40% of households currently on fixed tariffs, they will be unaffected.
00:42Nevertheless, this is a significant hit to many households across the UK.
00:46Yeah, how about the rest of Europe?
00:48And how does the UK's exposure compare with the rest of Europe we are looking at?
00:53And which economies are most vulnerable to a prolonged disruption in the Middle East?
01:00So, compared to Europe, the energy price cap has provided some insulation for UK households,
01:05which European households have not necessarily experienced.
01:08Nevertheless, the bill will come for the UK households,
01:11coming, as you mentioned, in the third quarter of the year.
01:14I think the picture across Europe is quite fragmented,
01:16though across Europe, governments are taking measures to try and insulate households
01:20where possible from these rising wholesale energy prices.
01:22Yeah, now it's because of the heat wave we receive from Europe now and also here in the UK.
01:29I'm pretty sure that the energy will, there will be more demand in energy
01:33and oil prices have risen sharply since the conflict escalated.
01:44So, the IMF has downgraded the global growth outlook from 3.3% to 3.1% for this year.
01:51That represents a loss of output in the order of magnitude of hundreds of billions of pounds.
01:56Obviously, the impacts of this cut will be largely unequal across the globe,
02:04with households in the global south bearing a higher brunt of this impact.
02:10Nevertheless, with a high level of uncertainty over the conflict,
02:13there is still downside risk that the global growth outlook will weaken further.
02:18Iranian state media has published what it says is a draft MOU that could pave the way for a deal.
02:24So, let's say, if tensions ease and agreement is really reached,
02:29how quickly could energy markets respond?
02:32So, this news coming out of Tehran today is obviously welcome news.
02:36We're still not at the point of a resolution,
02:38but what we would likely see if a resolution were signed
02:41was a gradual unwinding of the global energy shock
02:43that has gripped the world since the start of the conflict earlier this year.
02:48We would likely expect to see some of the inflationary pressures that have built ease,
02:54as well as a gradual return to shipping.
02:57I think within 30 days, there is an option for the straight-up form moves to be reopened
03:02and commercial shipping to be restored.
03:05So, these are all things that will help to pull down inflation,
03:09offering room for greater easing of monetary policy,
03:14while also removing some of the headwinds to global growth.
03:18Okay, thank you very much.
03:20Liam Daly, Senior Economist at the Center for Economics and Business Research.
03:24Thank you very much for your insight.
03:25Have a great week.
03:25That has been amazing.
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