More action needed to alleviate fuel poverty, energy expert warns

More action is needed to tackle fuel poverty as energy prices are likely to remain high for much of the year, a respected energy academic has said.

Professor Alex Kemp said the wholesale price of gas was unlikely to fall in the coming months and urged governments to focus their efforts on helping low-income households rather than “broad brush” approaches.

The Aberdeen University professor of petroleum economics has been on advisory panels for both the Scottish and UK Governments and has published more than 200 books and papers in the field.

Prof Kemp said a large increase in demand for gas in Asia was driving up the commodity’s price, as countries moved away from coal as a fuel source in line with environmental commitments made around Cop26.

He told the PA news agency: “Some countries, particularly big consuming countries in Asia (such as) China and India planned to reduce their use of coal very substantially.

“But they switched to gas. So a big increase in gas demand in Asia in particular, at a time when investment in new gas fields has been quite low because the price was very low.”

Prof Kemp also said that while the Opec group of oil-exporting countries had recently agreed to increase oil production, they did not go as far as Western countries such as the US would have liked.

The UK is very reliant on gas and imports more than half of what it needs, he said, noting that switching homes from gas to other sources of energy was still an expensive process.

Prof Kemp said: “The forward markets are showing that in a year, the (gas) price could come down.

“We are, of course, in a winter situation now when seasonally demand is much higher than in the summer.

“In the very near term we can’t expect much alleviation because supplies won’t increase – it will take some time.”

While the gas prices might drop in the summer, the decrease may not be “all that much”, he said.

Prof Kemp said the Chancellor’s recent package of support would not remove fuel poverty in the next few months.

He said: “Any further interventions should try to target low-income households.

“It could be via the social security system or some other new measure.

“I find it most likely that the price in the open market will increase further so if we are going to avoid a significant fuel poverty problem some more interventions on these lines will be needed.”

He continued: “Some of the ideas which have been discussed, like reducing the value added tax from 5% to 0% – that’s a very broad brush thing, it doesn’t target, in particular, low-income households.”

While “market fundamentals” have been the main driver of gas price increases in recent weeks, he said hostilities breaking out between Russia and Ukraine would inevitably lead to further increases.

Other gas producers, like Norway, have been able to increase their production, but Prof Kemp said “you can’t just turn the tap and get a whole lot more, you normally have to invest and that takes a whole lot of time to bear fruit”.

He said Scotland’s North Sea industry faced a “paradox” as there were several gas field which could be developed, but new environmental regulations presented a hurdle to investors.