SCOTS are shouldering £25 million in extra costs for every week that the war in the Middle East continues, according to new analysis.
By next year, as higher gas prices filter fully through to domestic energy bills, analysis from the Energy and Climate Intelligence Unit (ECIU) said oil and gas price volatility will have added around £90 to the average Scottish household’s energy costs.
With prices still well above pre-crisis averages, and since the re-escalation of conflict in July, the ECIU said these costs are likely to rise further.
The thinktank found that Scottish households have already incurred almost £230m in additional costs since the start of the US-Iran war, with road fuel costs accounting for a little over half of that figure.
Laura Anderson, senior consultant at the ECIU, said: “The conflict in Iran has once again exposed how vulnerable Scotland remains to volatility in international oil and gas markets.
“While households are hit by higher petrol prices now and higher energy bills to come, Scottish businesses, manufacturers and public services are currently carrying the biggest burden with gas driving up their costs and making them less competitive.”
She added: “These costs are effectively a fossil fuel price shock being imported into the Scottish economy.”
Oil and gas prices rose suddenly in March when the US-Iran conflict started, after a longer period of higher prices following the Russian invasion of Ukraine.
Gas prices recently rose to a four-month high, and oil prices rose to above 90 US dollars a barrel after a fragile ceasefire between the US and Iran broke down.
Oil prices have fallen back from 90 dollars a barrel in recent days, but the ECIU said even when the conflict ends, gas prices are not expected to fall suddenly because of damage to infrastructure, which impacts the global supply of liquefied natural gas.
The ECIU’s analysis estimated that Scottish energy users will shoulder more than half a billion pounds in additional energy and fuel costs as a result of the conflict, with businesses and industry carrying the largest share of the burden at around £290m.
This is equivalent to £15m a week in additional costs for Scottish industry.
The majority of this has been from increased road fuel prices (£170m), such as petrol and diesel.
However, Anderson urged new UK Prime Minister Andy Burnham to resist calls to allow more drilling in the North Sea because she said it won’t bring down prices, which are largely set internationally.
“The new UK Prime Minister has already pledged energy bill help to bail households out of some costs, but the only lasting protection from international oil and gas market turmoil caused by war thousands of miles away is to reduce dependence on fossil fuels altogether through electrification and British renewable power,” Ms Anderson said.
A DESNZ spokesperson said: “We’ve cut VAT on electricity to give families breathing space. The Energy Secretary’s focus is working to bring bills down for good.”
