British households are facing the threat of higher energy bills after wholesale natural gas prices surged by more than 40% during January. Analysts describe a confluence of factors, from cold snaps to geopolitical tensions, as a "perfect storm" putting upward pressure on costs.
The Drivers Behind the Price Spike
Data from LSEG revealed that day-ahead prices for UK gas delivery hit a six-month high on Friday 16 January 2026, rising over 14% in a single day. Contracts across Europe followed a similar trajectory. The primary catalysts are a combination of colder weather across northern Europe and significantly reduced deliveries of liquified natural gas (LNG), much of which usually comes from the United States.
According to figures from Gas Infrastructure Europe, storage levels across the continent are at a concerning 52% of capacity. After a mild start to winter, the recent cold snap has driven up demand, exposing vulnerabilities in supply. Shipments of LNG have been increasingly diverted to Asia, where prices are often higher, squeezing the European market.
Arne Lohmann Rasmussen, chief analyst at Global Risk Management, pinpointed the multiple pressures. "The market has been hit by a 'perfect storm' of cold weather forecasts, depleting storage, geopolitical risk in Iran and speculative trading activity that has seen short positions closed," he said.
Implications for Household Bills and Energy Security
The immediate consequence of sustained high wholesale prices is the potential for increased household energy costs. The price for UK gas delivery in February jumped by more than 8 pence per therm to over 98p. A prolonged spike is expected to be reflected in future bills, potentially affecting fixed-rate deals before the next energy price cap review in April 2026.
This volatility underscores the UK's ongoing exposure to global energy markets. Jess Ralston, an energy analyst at the Energy and Climate Intelligence Unit, noted: "It’s a reminder that the price of gas is largely set by the actions of foreign actors, beyond our control. The North Sea is continuing to run out of gas and won't help to lower bills or provide security of supply."
The Push for Renewable Alternatives
The government cites the eradication of such gas price volatility as a key reason for accelerating the transition to a renewables-based energy system. This week saw a record offshore wind auction completed, putting the country on track for its 2030 clean power goals, albeit at an 11% higher "strike price".
Data from the National Energy System Operator showed that on Thursday, gas-fired power still provided 36% of UK electricity, closely followed by wind. During the recent cold snap, gas's share climbed above 50% for four consecutive days. However, analysts point to the stabilizing role of renewables. "Wind cut the wholesale day-ahead electricity price by around a third in 2025," added Ralston, highlighting how increased renewable capacity can shield consumers from future fossil fuel price shocks.
Long-range forecasts suggesting a further plunge in temperatures towards the end of January, coupled with lower wind speeds reducing green energy output, mean the immediate pressure on gas supplies and prices is likely to persist.
