The UK’s announcement that it will phase out Russian oil imports by the end of the year is likely to have an impact on consumers who are already feeling the pain of rising inflation and high energy and fuel bills.

The government also said it was reviewing options to end Russian natural gas supplies to the UK, which account for less than 4% of the country’s total supplies.

Here’s what the UK’s move to replace Russia’s 8% oil could mean for the bills:

energy prices

Household energy bills are set to rise as early as April, and the new move could lead to bigger increases later in the year as oil and gas prices come under more pressure. Brent crude jumped to $133 a barrel on Tuesday, close to a 14-year high set on Monday.

The good news for households with standard gas and electricity supplies is that the Ofgem billable energy price cap will prevent providers from introducing variable tariffs for the foreseeable future. The higher price cap valid on April 1st is valid until the end of September.

The cap will be updated in August, with the new cap taking effect from early October – so a lot will depend on how the energy market is doing at that point. Some experts had already suggested that average annual bills could reach £3,000 and this latest announcement increases the likelihood of that happening.

Even if wholesale gas costs fell by the summer, rising prices will put suppliers under pressure in the short term. If more go to the wall, there could be higher costs in the pipeline for customers.

Electricity base rates will rise by around 80% in some cases in April to cover the costs of last year’s collapse of the energy company, and as more go bust, the cost of serving their customers will eventually feed through to bills.

For those not connected to the gas grid, the pain will be at home much faster. Heating oil prices have soared in recent days – the average price for a liter of heating oil had risen from 66.77p on February 23 to 117.83p on Monday, according to website BoilerJuice. Pressure on global supply will push this higher.

cost of groceries

Gas and oil prices are a major factor in how much we pay for groceries, and if they continue to rise, the cost of groceries will rise as well. Fertilizer prices have skyrocketed due to soaring gas prices and will result in farmers having to charge more for everything they produce.

Cooking oil prices have already risen, with one of the drivers being demand for biodiesel crops. Rising oil prices will add to this pressure. Rising cooking oil prices will affect all types of food — margarine, peanut butter, and long-life cream are just a few of the products that contain it.

gas prices

The move will put even more upward pressure on prices at the pump, which — it was revealed Tuesday — just rose by the largest weekly amount in years. The cost of filling up a 55-litre family car has risen by more than £2 in a week, according to government data released on Monday March 7.

“Russia is our largest source of diesel outside the UK, supplying 18% in 2020 but hovering around 15-20% annually,” says a report by Autocar.

But the Department for Business, Energy & Industrial Strategy (BEIS) said that “more than two-thirds of our road fuel is domestically produced.”

The new move will be phased in over several months, giving markets some time to adjust and allowing alternative suppliers to be found, but whether this will be enough to deter motorists from panic buying remains to be seen.

The average price of a liter of petrol at UK petrol stations rose from 149.2p on February 28 to 153p on Monday (March 7), according to BEIS, while average diesel prices rose from 153.4p to 158.6p over the same period .

Higher interest rates

Rising inflation would normally mean higher interest rates. The Bank of England is tasked with keeping inflation at 2% – but the annual rate of price growth had already reached 5.5% before the Russian invasion of Ukraine, and rising petrol and food prices will continue to push it higher, with some Economists predict inflation of just under 9% by the end of the year.

But the bank will be aware that households are facing higher costs and may decide not to apply further pressure by rapidly raising borrowing costs, as some have predicted. When it meets next week, it could opt to hike rates from 0.5% to 0.75%, rather than 1% as some commentators have predicted.

If the bank raises interest rates, it increases mortgage costs for those who receive adjustable-rate home loans and could push up the price of new personal loans.

Fixed-rate mortgages have historically been cheap enough that most homeowners and landlords have them, protecting them from rising costs, at least in the short term.