The World Faces a 'Cost of Living Crisis'... UK Announces 42% Increase in Energy Price Cap

US LNG Prices Soar Nearly Threefold Since Early Year
India Imposes Sugar Export Restrictions Following Wheat, Raising Inflation Concerns

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The UK government’s announcement to raise the energy price cap by more than 40% highlights how global inflation, triggered by the Ukraine crisis, is threatening the livelihoods of ordinary people. The supply chain issues, initially sparked by semiconductor and key raw material shortages, have now spread to essential daily commodities such as oil, natural gas, and food, placing countries in a position where they must confront a ‘cost of living crisis.’

According to the BBC on the 24th (local time), Jonathan Brearley, CEO of the UK electricity and gas market regulator OFGEM, testified before Parliament that "the energy price cap is expected to rise from ?1,971 (approximately 3.12 million KRW) annually to ?2,800 this October." He stated, "Wholesale gas prices have surged more than tenfold," describing it as "an event occurring once in a generation, unseen since the 1970s oil crisis." Consequently, the UK’s energy prices are projected to increase by over 42% starting in October.

The possibility of OFGEM raising the energy price cap had been previously hinted at by UK Chancellor Rishi Sunak. At the Confederation of British Industry (CBI) annual dinner on the 20th, Sunak warned, "The rise in energy costs is a global trend, and no government has a solution to fix this overnight," adding, "The coming months will be difficult."

[Image source=Reuters Yonhap News]

OFGEM had already raised the energy price cap by 54% last month. There are concerns that an additional increase in the price cap from October, when heating gas demand surges across Europe, will severely impact low-income households. The UK’s consumer price index rose 9% year-on-year last month, marking the highest increase in 40 years since 1982. With the additional energy price hike in October, inflation is expected to exceed 10%.

Since the Ukraine crisis, prices of US liquefied natural gas (LNG), which European countries rely on as a major energy substitute, have also surged sharply. On this day, US natural gas futures on the New York Mercantile Exchange (NYMEX) reached $8.84 per 1MMbtu (British thermal unit), the highest level in 14 years since 2008. Having nearly tripled from $3.81 at the beginning of the year, concerns over a global gas supply crisis this winter are growing.

[Image source=Yonhap News]

Export controls on food products by major food-exporting countries are further fueling price increases. According to the Associated Press, following Brazil, India?the world’s second-largest sugar producer?announced export restrictions limiting sugar exports to 10 million tons this year. This follows the wheat export restrictions announced on the 13th, further tightening controls on food exports.

Malaysia also announced it will halt the export of 3.6 million chickens monthly starting next month. According to Bloomberg, Malaysian Prime Minister Ismail Sabri Yaakob stated in a press release, "The government’s Competition Commission is investigating allegations of collusion among major companies controlling chicken prices and production volumes," warning, "If any suppliers disrupting supply are identified, strict measures and legal actions will be taken regardless of location."

This content was produced with the assistance of AI translation services.