Gas prices: the latest worry for tired consumers

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September 22, 2021 - Furnley House

Gas prices: the latest worry for tired consumers

Rising gas prices and energy companies going bust is the latest financial worry. Industry group Oil & Gas UK has said wholesale prices for gas had increased by 250% since January – with a 70% rise since August. We all need gas, whether it is to run our homes, to keep our grocery stores open and hospitals running, and a significant price hike is going to effect everyone in one way or another.

The sudden surge in gas prices comes at a time when many people are fatigued with being worried about money. Covid has changed the regular rhythms of life, and it has brought job insecurity and caused havoc in many sectors of the economy. It has made us question the sureties of what we had previously seen as pillars of certainty and security on which we built our lives. Even though energy providers are saying there won’t be actual power outages, we know that every time we turn on the heating our household costs are going to up, and budgets will be impacted. This is the latest significant change in lifestyle caused by Covid that we can’t control.

At these moments, it is important to take a step back to put things into perspective. To ask ‘will the change in prices really effect my monthly budget, and is this something I need to prepare for?’ Most people will not like the increase in prices, and when it starts getting chilly many may reach for an extra jumper before they turn up the heat, but they may well be able to afford higher bills.

For those in financial hardship however it is likely to be an extremely challenging winter.

What we often see in moments of widespread financial bad news is that some clients panic and feel vulnerable, but surprisingly this can often be those who are the most financially secure. When bad news starts to seep in on a basic consumer level, people can make knee jerk decisions about their wider finances. Feeling rattled, they may seek to de-risk their investments or suddenly liquidate assets into cash, going against sensible and logical financial decisions.

When we are forced to make or accept a decision for which there is no precedent, our go-to solution is to look at what other people are doing. At the moment we are being warned of price rises and business are taking this seriously, warning that there could be far reaching consequences. If those around us are fearful and panicked about the rising costs of living, then it is very easy to get caught up in a ‘herd mentality’ and not have clarity about your own personal situation and think systematically about your own choices and individual circumstances. If everyone around us is hiding cash under their beds and pulling out of investments, we might take comfort by doing the same things. We can forget to consider whether everyone else is right, or if the choices we are making are good personal decisions.

Right at the moment, a glimmer of better news is that whilst gas prices and smaller suppliers are under strain, consumers are protected by Ofgem. This ensures supplies continue for affected households, and they will not lose money owed to them. A new energy supplier would be responsible for taking on any credit balances a customer may have, but consumers may end up on more expensive tariffs when they are switched.

Some investment funds will be effected by the current volatility in the energy markets, and rises and falls in any investment class is expected. But most people who use a good independent financial adviser will have a portfolio which is diversified according to their risk profile to ride out fluctuations such as these. It means that sudden unexpected bad news will cause movement in a portfolio, but it is unlikely to de-rail a long-term investment or retirement plan.

Planning for the unexpected is always important, and having cash savings to ensure your financial flow is sensible. But the long term goals matter too. If you are financially secure it is likely you will be able to ride out the rise in gas prices without changing your existing financial arrangements.

Bumps in the road, such as a hike in energy prices will come and go but they shouldn’t distract you from much bigger and important personal challenges, like having a clear and solid structure which keeps you on track towards a financially secure retirement. In times of bad news and volatility a robust financial plan and a well diversified investment portfolio is there to protect you.

If you have more questions or you want to talk about financial planning for the future then our Independent Financial Advisers can help. To find out more call Furnley House on 0116 269 6311 or email info@furnleyhouse.co.uk.