Economy

British households face average annual energy bills surging above £5,000 next year, according to the latest forecast, which will heap further pressure on the government to intervene to ease the spiralling cost of living crisis.The warning from consultancy Auxilione follows a steep rise in wholesale British gas prices this week and comes as ministers meet electricity generators in Downing Street on Thursday morning. The talks will focus on how to respond to the impact of rising wholesale energy prices driven primarily by Russia’s squeeze gas on supplies to Europe.The price cap, which governs gas and electricity bills for the vast majority of UK households, has already jumped to £1,971 from £1,277 this year. Earlier this week, another forecast suggested it would hit £4,420 next April, more than three times the level it was at the start of 2022.Auxilione said it expected regulator Ofgem to set the price cap at “just over £3,600” when it announces the results of its next review, now held every three months, on August 26. That rise would take effect in October before the cap was expected to exceed £5,000 in the first half of 2023, the consultancy added.Earlier this week, Cornwall Insight forecast the cap would reach £4,420 in the spring, but wholesale gas and electricity prices have risen further in recent days.The Auxilione forecast follows warnings of a severe drought affecting shipments of coal and other commodities on the river Rhine in Germany, a key artery for supplying power stations. Norway has also signalled it will restrict electricity exports.Gas prices have soared as Russia has curbed supplies to Europe, in a move European politicians have decried as a “weaponisation” of gas supplies following the full-scale invasion of Ukraine.Surging energy bills has become a key issue in the ruling Conservative party’s leadership election that will appoint a new prime minister to replace Boris Johnson in early September.Rising inflation and concerns that sky-high energy prices will tip the wider economy into a deep recession as households cut back on spending have led to calls for more aggressive government intervention, from additional financial support to an overhaul of how electricity markets function.The prospect of a windfall tax on electricity generators, some of whom have enjoyed bumper profits from renewables and nuclear generation, has resurfaced.Chancellor Nadhim Zahawi has kept alive the prospect of hitting the generators with an additional tax bill if they do not invest their profits in renewable energy schemes, though other options are also on the table.Business and energy secretary Kwasi Kwarteng — who is widely tipped to be the next chancellor if leadership frontrunner Liz Truss becomes prime minister — is looking at options to decouple electricity prices unassociated with gas generation. Companies including EDF, Centrica, Drax and RWE are attending the meeting with Kwarteng and Zahawi.

Former chancellor Rishi Sunak, who is running against Truss, has accused his rival of being slow to appreciate the depth of worry among households and the need for additional financial support. He has promised to expand a £15bn support package he announced in May. At the time bills were expected to reach about £2,800 in October.Truss has said she favours tax cuts over “handouts” but has left open the door to additional support. She said on Wednesday it was “important” to work with energy companies to bring prices down.Auxilione said there appeared to be “little appreciation” in government “for just how impossible” it would be to lower prices. “Energy companies and the government have little control over this in such a globally influenced market,” it added.Ofgem has cautioned about forecasts for the price cap given the volatility in energy prices. More

Poland is eligible for 24 billion euros in grants and 11.5 billion euros in very cheap loans to rebuild its economy greener and more digitalised after the COVID-19 pandemic.But the money is frozen because Poland’s ruling eurosceptic PiS party does not want to roll back changes to the judiciary introduced over the last seven years, even though it is one of the conditions that was jointly agreed with the Commission.PiS leaders this week vowed they would not make any concessions and threatened to make EU decision-making difficult unless Poland can draw on the EU fund.”The Commission and Poland have discussed this plan for months, in every detail, it has been signed by both sides, so there is no space for misunderstandings,” a Commission spokeswoman told a regular briefing.”It is clear that the agreed milestones and targets have to be met,” she said. More

Western sanctions have had “limited impact” on Russian oil output since the start of the war in Ukraine, the International Energy Agency said on Thursday, as it raised its forecast for Russian crude production into 2023.Moscow’s exports of crude and oil products to Europe, the US, Japan and Korea had fallen by nearly 2.2mn barrels a day since its full-scale invasion of Ukraine, the Paris-based group said. But the rerouting of flows to countries including India, China and Turkey had mitigated financial losses for the Kremlin.Russian oil production in July was only 310,000 b/d below prewar levels, a fall of less than 3 per cent, while total oil exports were down about 580,000 b/d, according to the IEA’s latest monthly oil report. As a result, Russia would have generated $19bn in oil export revenues last month, and $21bn in June, the IEA’s data showed.“Asian buyers have stepped in to take advantage of cheap crude,” the IEA said, with China having overtaken the EU as the biggest importer of Russian crude in June.Increased demand for Russian crude compared with earlier in the year also meant that the discounts being paid for Russian cargoes had narrowed, it said. Although an EU embargo on Russian crude and products — due to come into full effect in February 2023 — would result in further declines in European imports, “some policymakers have suggested a possible softening of measures”, it added.Last month, the EU loosened its restrictions on supplying Russian oil to countries outside of the bloc. Meanwhile, the US is pushing G7 countries to support a price cap mechanism that would allow some Russian oil to reach third countries as long as they agreed to pay a below-market price for the cargo.In response, the IEA said it had increased its Russian production forecast for the second half of 2022 by 500,000 b/d and by 800,000 b/d for 2023.The revised Russian outlook came as the IEA also increased its global oil demand forecast for 2022 by 380,000 b/d, despite signs of an economic slowdown. Record European prices for natural gas following the invasion had spurred “substantial” gas-to-oil switching for power generation that is set to boost crude consumption for the rest of the year even as demand growth from other parts of the economy slows.“These extraordinary gains, overwhelmingly concentrated in the Middle East and Europe, mask relative weakness in other sectors, but will propel demand higher by 2.1mn b/d to 99.7mn b/d in 2022 and by a further 2.1mn b/d to 101.8mn b/d in 2023,” the IEA said.Oil use for power generation has also been pushed higher by increased electricity demand due to the global heatwave, which has seen temperatures hit record levels in some parts of the world, including the UK. Oil burning has soared in Saudi Arabia and Iraq but also increased in Portugal, UK, Spain, Germany and Italy, it said.The EU’s commitment to reduce member countries’ gas consumption by 15 per cent from August 2022 to March 2023 will continue to increase oil demand by roughly 300,000 b/d for the next six quarters, the IEA added. More

WASHINGTON (Reuters) – China’s war games around Taiwan have led Biden administration officials to recalibrate their thinking on whether to scrap some tariffs or potentially impose others on Beijing, setting those options aside for now, according to sources familiar with the deliberations.President Joe Biden’s team has been wrestling for months with various ways to ease the costs of duties imposed on Chinese imports during predecessor Donald Trump’s tenure, as it tries to tamp down skyrocketing inflation. It has considered a combination of eliminating some tariffs, launching a new “Section 301″ investigation into potential areas for additional tariffs, and expanding a list of tariff exclusions to aid U.S. companies that can only get certain supplies from China.Biden has not made a decision on the issue and all options remain on the table, the White House said. The tariffs make Chinese imports more expensive for U.S. companies, which, in turn, make products cost more for consumers. Bringing down inflation is a major goal for Biden, a Democrat, ahead of the November midterm elections, which could shift control of one or both houses of Congress to Republicans.But Beijing’s response to U.S. House Speaker Nancy Pelosi’s visit last week to Taiwan triggered a recalculation by administration officials, who are eager not to do anything that could be viewed by China as an escalation while also seeking to avoid being seen as retreating in the face of the communist country’s aggression.China’s military for days took part in ballistic missile launches and simulated attacks on the self-ruled island of Taiwan that China claims as its own.”I think Taiwan has changed everything,” said one source familiar with the latest developments in the process, details of which have not been previously reported.”The president had not made a decision before events in the Taiwan Strait and has still not made a decision, period. Nothing has been shelved or put on hold, and all options remain on the table,” said White House spokesperson Saloni Sharma. “The only person who will make the decision is the president – and he will do so based on what is in our interests.”Asked why a decision was taking so long, Commerce Secretary Gina Raimondo referred to the complicated geopolitical situation.”After Speaker Pelosi’s visit to Taiwan, it’s particularly complicated. So the president is weighing his options. He is very cautious. He wants to make sure that we don’t do anything which would hurt American labor and American workers,” she said in an interview with Bloomberg TV. EXCLUSIONS LISTWith the most forceful measures regarding tariff relief and tariff escalation largely on the back burner for now, focus is on the so-called exclusions list.The Trump administration had approved tariff exclusions for more than 2,200 import categories, including many critical industrial components and chemicals, but those expired as Biden took office in January 2021. U.S. Trade Representative Katherine Tai has reinstated only 352 of them. Industry groups and more than 140 U.S. lawmakers have urged her to vastly increase the numbers.The Biden administration’s next steps could have a significant impact on hundreds of billions of dollars of trade between the world’s two largest economies. U.S. industries from consumer electronics and retailers to automotive and aerospace have been clamoring for Biden to eliminate the duties of up to 25% as they struggle with rising costs and tight supplies.The tariffs were imposed in 2018 and 2019 by Trump on thousands of Chinese imports valued then at $370 billion to pressure China over its suspected theft of U.S. intellectual property.Some senior administration officials, including Treasury Secretary Janet Yellen, had argued the duties were imposed on “non-strategic” consumer goods that had unnecessarily raised costs for consumers and businesses, and removing them could help ease rampant inflation. Tai argued the tariffs were “significant leverage” that should be used to press China for changes to its behavior.MULTIPLE FACTORSMultiple factors, in addition to China’s Taiwan response, have complicated the administration’s deliberations.As U.S. officials considered getting rid of some of the tariffs, they sought reciprocal rollbacks from Beijing and were rebuffed, two sources said. One of the sources, who said a unilateral removal of some U.S. tariffs on Chinese imports has been put on hold, said this was done in part because China failed to show any willingness to take reciprocal actions or meet its “Phase 1” trade deal commitments.A spokesperson for the Chinese embassy in Washington said economic and trade relations between the two countries faced “severe” challenges.”The (Pelosi) visit has undermined the political foundation of the China-US relations and will inevitably cause major disruption to the exchanges and cooperation between the two sides,” Liu Pengyu said in an email to Reuters.The trade deal, reached at the end of 2019 with the Trump administration, required China to increase its purchases of U.S. farm and manufactured goods, energy and services by $200 billion in 2020 and 2021 over 2017 levels. China fell well short of these commitments, which included a $77.7 billion two-year increase in imports of U.S. manufactured goods, including aircraft, machinery, vehicles and pharmaceuticals. The Peterson Institute for International Economics estimates that China effectively bought none of the extra goods it promised. Beijing blamed the COVID-19 pandemic, which began just as the deal was signed in January 2020.The U.S. Trade Representative’s office is now in the midst of a statutory four-year review of the tariffs imposed by Trump, which could take a few more months to complete. Final public comments on whether to keep them in place are due by Aug. 23.Union groups led by the United Steelworkers have urged USTR to keep the tariffs on Chinese goods in place to help “level the playing field” for workers in the United States and reduce U.S. reliance on Chinese suppliers.Biden has been concerned about rolling back tariffs in part because of labor, which is a key constituency for him, and because of China’s failure to buy the products it had agreed to purchase, according to the first source. The White House has declined to lay out a timeline for when a final decision will be made. More

The Conservative government proposed a welter of reforms last month in a bill to boost London’s appeal to global investors in the wake of Brexit, increase investments by insurers in infrastructure, and regulate some cryptoassets.On Wednesday, the Financial Times reported that Liz Truss, the front-runner to succeed Boris Johnson as prime minister next month, would add new powers to the bill, giving ministers the ability to override financial regulators like the Bank of England (BoE), if deemed in the public interest.BoE Governor Andrew Bailey said in a letter to parliament’s Treasury Select Committee that he welcomed the financial services bill as initially proposed, which is intended to “establish a strong, responsive and internationally respected” approach to regulating financial services in Britain.”Regulatory independence is important, not least because our international standing, and therefore the competitiveness of the UK financial sector which the reforms are aimed at enhancing, depends on it,” Bailey said.”Anything that would weaken the independence of regulators would undermine the aims of the reforms,” Bailey added in the letter dated July 27 and published by the committee on Thursday.Bailey said the BoE’s banking regulatory arm would publish a discussion paper next month, setting out the BoE’s vision for implementing the reforms as they currently stand in terms of strong standards, accountability to parliament, stakeholders, and the public at large. More

There will be no such thing as a Free Lunch next week, but Martin Sandbu will be back on August 25. The cost of shipping a 40ft steel box across the world’s oceans has sunk. The nickel in a nickel is no longer worth more than the nickel itself. Even US headline inflation is falling. There have been some pretty convincing signs of late that the price surges in markets, from copper to used cars, that we’ve seen over the past year might now be behind us. Is it time for Team Transitory, a camp that took more blows than a UFC fighter during the first half of 2022, to launch a fightback and say inflation has been defeated? Not quite. That’s not to say the falls in the cost of container shipping and commodities don’t mean something. They show us that global trade, far from being on its deathbed, is resilient. That dynamism will help drive down supply-side price pressures. Yet these pandemic-era bottlenecks were — as their name implies — always going to dissipate. Meanwhile, the massive (and less soluble) supply-side risk presented by Russia cutting off, or even limiting, gas flows to Europe remains a threat. To get a sense of the degree to which energy prices are driving headline inflation, consider this. According to Bank of England deputy governor Ben Broadbent, between the first quarters of 2021 and 2023, the impact of the shock on households’ utility bills is likely to be five times as big as it was between 1974 and 1976 — the worst two years of the 1970s, a decade renowned for its oil price crisis. We don’t want to downplay the good news. In the US, less exposed to the impact of the Ukraine war, headline inflation may well have peaked. While it may take a little longer in Europe, the record-high prints will soon subside here too. But we would caution against seeing today’s print as evidence that the Federal Reserve, and other central banks, may be about to pivot to a much less aggressive strategy — or, as some investors are now pricing in, cut rates early next year as recession bites.What really matters for policymakers is not where inflation turns but how quickly it slides towards a level they are comfortable with. Our bet is that this level is between 2 and 3 per cent. Yet there’s much to suggest price pressures could stick around the 4 to 5 per cent mark for some time yet. The possibility of a sluggish shift back to 2 per cent is not just about the risk presented by energy prices, substantial though it might be. While monetary policymakers, including Fed chair Jay Powell, have been keen to heap the blame for failing to spot inflation on supply chains and the war in Ukraine, that’s not the only element that has been driving prices higher. As Stephen Cecchetti, of Brandeis University, put it: “It is odd that central bankers are focusing so heavily on supply-side inflation when demand is such a big component of the surge, especially in the US.”A core part of the demand-side story is the hotness of the labour market. Tiffany Wilding and Allison Boxer, economists at bond manager Pimco, pointed out in a note published on Wednesday that wage inflation in the US has broadened from the low-wage, low-skill services sectors to a range of industries, occupations and skill levels. Productivity levels, meanwhile, have fallen. According to their estimates, unit labour cost inflation is at 7 per cent — a level that has historically implied core CPI inflation of about 4 per cent. If Powell really wants to bring inflation to as low as 2 per cent, it increasingly looks as though the Fed will have to destroy jobs. Then there is inflation’s self-fulfilling element, where its mere presence creates more of the stuff. Joanna Konings, a senior economist at ING, points to the likes of UK dairy farmers, who may have spent years unable to raise their prices due to the major supermarkets’ sway, but who can now point to soaring energy and commodity prices and ask for more. “When inflation is easy to point to — when it’s clear costs are going up in a very visible way, then that strengthens the hand of any supplier. Producers are able to point to price increases, and in turn demand more from their customers,” she said. This world of margins does not contain infinite room for manoeuvre. Consumer prices for staples such as food and energy and shelter have soared at a pace that has left many people facing the worst cost of living crisis of their lifetimes. That crisis — and central banks’ rate rises — will weigh on demand. Yet this scrap between supplier, retailer and consumer is likely to take a while to play out. While it does, uncomfortably high inflation will prove harder to shift than a big boat stuck in the Suez Canal. Other readablesFT Alphaville has apologised (sort of) to CNBC’s Jim Cramer for doubting his capacity to predict inflation, or indeed anything. Chris Giles explains how collaboration between EU member states and energy substitution by industry can soften the blow dealt by gas shortages. Bloomberg’s Warsaw bureau chief Piotr Skolimowski has written a moving piece on how one Ukrainian family is adapting to life in Poland. Numbers newsFood prices are among those that have surged over the past year. However, over the past few months, the cost of food commodities, traded on international markets, have fallen. More

Investing.com — U.S. stocks are set to open higher in the wake of the weaker-than-expected consumer inflation report, with Disney’s subscriber increase helping. New producer prices and jobless claims data are scheduled for release, while IEA data points to a tightening supply situation in the crude market. Here’s what you need to know in financial markets on Thursday, August 11.1. Inflation optimism overdone?Risk sentiment has been on the rise Thursday, boosted by Wednesday’s cooler-than-expected consumer inflation reading, which investors have interpreted as easing the pressure on the U.S. Federal Reserve to aggressively tighten monetary policy.Investors are now pricing in a 50 basis point hike by the Fed in September, down from earlier expectations of a 75 basis point hike.However, they could well be jumping the gun.Fed policymakers were quick to speak after the release, attempting to dilute this optimism.The Fed is “far, far away from declaring victory” on inflation, said Minneapolis Federal Reserve Bank President Neel Kashkari, San Francisco Federal Reserve Bank President Mary Daly also warned it is far too early to “declare victory,” while Chicago Fed President Charles Evans stated inflation was still “unacceptably” high.After all, while inflation was flat in July, month on month, after advancing 1.3% in June, it was still up 8.5% compared to a year ago. And that’s still unacceptable.2. Disney takes lead in streaming gameWalt Disney (NYSE:DIS) has taken the lead in the global streaming competition, edging past Netflix (NASDAQ:NFLX) with a total of 221 million streaming customers as part of its third quarter results, announced after the close Wednesday.Disney started building a streaming service to rival Netflix in 2017, recognizing that audiences were moving to online viewing from traditional cable and broadcast television.The entertainment giant said that total Disney+ subscriptions rose to 152.1 million during the quarter. Combined with Hulu’s 46.2 million subscribers and the 22.8 million with ESPN+, this total of over 221 million surpasses long-time leader Netflix’s 220 million subscribers.This popularity has given Disney the license to plan price increases for customers who want to watch Disney+ or Hulu without commercials, even with the public struggling with soaring inflation.That said, the company also lowered its long-term subscriber forecast for Disney+ customers on Wednesday to between 215 million and 245 million by the end of September 2024, blaming the loss of cricket rights in India. That is down from the 230 million to 260 million which Disney had been forecasting.3. Stocks set to edge higher; Disney soarsU.S. stock markets are set to open marginally higher Thursday, continuing the previous session’s sharp gains on the back of the weaker-than-expected inflation report.By 06:00 ET (10:00 GMT), Dow Jones futures were up 105 points, or 0.3%, S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.2%.The main Wall Street indices all closed with strong gains Wednesday, with the blue-chip Dow Jones Industrial Average rising over 500 points or 1.6%, the broad-based S&P 500 gaining 2.1%, and the tech-heavy Nasdaq Composite soaring 2.9%, closing at its highest level since late April.Helping the tone Thursday were strong results after the close Wednesday from Disney [see above], with the entertainment giant’s stock seen over 7% higher premarket.The earnings season continues Thursday, with reports from the likes of Rivian Automotive (NASDAQ:RIVN), Warby Parker (NYSE:WRBY), and Poshmark (NASDAQ:POSH) scheduled.Other companies in the spotlight include Sonos (NASDAQ:SONO) and Bumble (NASDAQ:BMBL), with both stocks sharply lower premarket after slashing their full-year guidance.4. PPI, Initial Jobless Claims data dueFollowing the excitement of Wednesday’s CPI release [see above], investors will be looking to the release of the U.S. producer price index for July for confirmation of a lessening of inflationary pressures.Producer prices increased more than expected in June, climbing 1.1% on the month, but are expected to have only climbed 0.2% in July as the extraordinary energy price rises stabilized. This still represents an annual rise of 10.4%, down from 11.3% the previous month.The PPI number is due at 08:30 ET (12:30 GMT), the same time as the release of the weekly initial jobless claims number.The number of Americans filing new claims for unemployment benefits increased last week by 6,000 to 260,000, suggesting some softening in the labor market.This softening is expected to continue, with the number of new jobless claims seen increasing to 263,000.5. Oil rises; IEA points to falling Russia outputCrude oil prices rose Thursday, boosted by renewed concerns about supply tightness following the publication of a report by the International Energy Agency.Russia’s oil output is set to fall roughly 20% by the start of next year as a European Union import ban comes into force, according to a market report from the Paris-based intergovernmental organization, with close to 2 million barrels a day shut in by the start of 2023.Oil is struggling to find direction as the market has yet to reach a consensus on the outlook for supply and demand.The market slipped back earlier Thursday on the resumption of flows through a key European pipeline, from Russia along the southern Druzhba network, as a payment dispute was resolved.U.S. crude inventories rose by 5.5 million barrels last week, according to data from the Energy Information Administration, released Wednesday. This is the second straight week of an unexpectedly large rise in U.S. oil stocks, suggesting weakening demand at the world’s largest consumer.By 06:00 ET, U.S. crude futures were up 1.2% at $93.00 a barrel, while Brent crude was up 1% at $98.39 a barrel. More

US petrol prices have dropped below $4 a gallon for the first time since Russia’s invasion of Ukraine, as fears of a looming recession put the brakes on soaring fuel markets, tempering rampant inflation.The average price of a gallon of gasoline tumbled to $3.99 on Thursday, according to motoring group AAA. That leaves the price at the pump down by a fifth since hitting record levels over $5 in mid-June, in the fastest decline since the 2008 recession.“It feels like a pretty big decline to go from a five to a four to a three,” said Patrick De Haan, head of petroleum analysis at GasBuddy, a price tracking service. “It’s good news for beleaguered motorists that were hit by record high prices this year.”The slide in prices is not confined to the US, as jitters over an impending global economic slowdown and a corresponding drop-off in driving offset some of the upheaval in oil markets triggered by the war in Ukraine. The Energy Information Administration has reported US petrol demand over the last four weeks has been running about 6 per cent lower than a year ago, at 8.9mn barrels a day. European prices have fallen 9 per cent from their June highs to €1.86 a litre ($7.32 a gallon), according to the latest European Commission data. In the UK, they are down 8 per cent to £1.76 a litre ($8.20 a gallon), according to the RAC motoring group. Heavier taxation in those jurisdictions, coupled with the strength of the dollar, mean the drop has been shallower than in the US.The rapid fall in American prices has helped to cool inflation. The US consumer price index rose at an annual rate of 8.5 per cent in July, decelerating slightly on the back of lower petrol prices.The US has one of the world’s highest car ownership rates, with around 92 per cent of households having access to at least one vehicle, according to the latest census, making petrol prices a prominent political issue. The country consumes about a fifth of the world’s oil despite being home to just 4 per cent of the world’s population.High petrol prices have become a political liability for US President Joe Biden, despite his limited ability to influence them. In response, the president has taken measures including releasing record volumes of crude oil from the country’s emergency stockpiles and leaning on producers to pump more supply. The price of diesel, used in industries such as trucking and agriculture, has also fallen sharply. It sat at $5.08 on Thursday, according to the AAA, down 12 per cent from $5.81 in June.The fall in prices is a sharp reversal from recent months. Prices at the pump were already escalating rapidly at the beginning of the year, fuelled by resurgent post-pandemic demand, when Russia’s invasion of Ukraine in February shook global oil markets and accelerated the climb. Brent crude, the international oil marker surged past $100 a barrel.By mid-June, soaring crude prices and tight global oil refining capacity market had pushed US petrol prices to $5.02 a gallon — their highest level ever level without adjusting for inflation. More