Selected Issues Papers

The Energy Price Shock—Impact, Policy Responses, and Reform Options: United Kingdom

Author/Editor:

Anil Ari ; Carlos Mulas-Granados

Publication Date:

July 13, 2023

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

The surge in energy prices due to Russia’s war in Ukraine inflicted a sharp terms of trade shock on the UK economy. While energy prices have since declined, the future energy price path remains uncertain, with futures-implied prices substantially above their levels prior to October 2021, when Russian natural gas imports to Europe began to be curtailed. In this context, section I analyzes the impact of the energy price shock on UK households and firms; section II describes the energy support measures introduced by the UK government; and section III provides staff’s assessment of these measures and sets out some options to optimize the policy response to a possible resurgence in energy prices. These include structural measures to ensure energy security and raise resilience to spikes in energy prices, and options to refine, especially the targeting of, support measures that could be introduced in response.

Series:

Selected Issues Paper No. 2023/048

Subject:

Commodities Consumption Economic sectors Electricity Energy prices Fuel prices International organization Monetary policy National accounts Natural gas sector Prices

Frequency:

Regular