Why Do Business Gas Prices Fluctuate? | UK Energy Cost Breakdown

Business energy pricing in the UK can feel like a moving target—and when it comes to business gas prices, that volatility is no accident. From global trade flows and weather shifts to infrastructure costs and environmental taxes, there are dozens of forces shaping what your business pays.

In this guide, we break down where the UK gets its gas, what influences wholesale prices, and why those same forces affect your electricity bills too.

Where Does the UK Get Its Gas?

The UK sources its natural gas from both domestic and international supplies. Around 45% comes from the North Sea and Irish Sea, but domestic production is declining year by year.

To meet demand, the UK imports the rest from countries like Norway, the USA, and Qatar, often in the form of Liquefied Natural Gas (LNG). These imports are transported via pipelines from Europe or shipped to coastal terminals.

To ensure energy security, the UK uses storage facilities such as:

• Depleted gas fields

• Salt caverns (e.g. in Cheshire, Dorset, and East Yorkshire)

Salt caverns offer faster "in/out" capacity and are particularly useful during peak winter demand or supply shocks. They also play a key role in the UK's future hydrogen and renewable energy strategies.

How Are Gas Prices Calculated?

Gas prices are made up of several components:

1. Wholesale Costs

This is the price suppliers pay to purchase gas on the open market. It fluctuates daily based on global supply and demand, currency shifts, weather forecasts, and geopolitical events.

Forward Contracts: Prices agreed for delivery at a future date

Day-Ahead Contracts: Prices for next-day delivery (typically used for variable or out-of-contract rates)

2. Network Charges

This covers the cost of delivering gas safely via the UK's four main gas networks. These include pipeline maintenance, repairs, and upgrades.

3. Environmental Levies

Businesses pay the Climate Change Levy (CCL) on their energy use. The CCL is intended to encourage greater energy efficiency and help fund the transition to renewables.

Energy-intensive industries may be eligible for discounts or exemptions.

4. Operating Costs

Suppliers pass on costs for maintaining production and infrastructure—including labour, field development, and equipment upgrades.

5. Taxation

There are three key forms of tax that affect gas production:

Ring Fence Corporation Tax: Applied only to profits from UK oil and gas extraction

Supplementary Charge: A top-up tax on ring-fenced profits

Petroleum Revenue Tax (PRT): Designed to ensure the public benefits from the nation’s natural resources

6. Profit Margin

Suppliers are businesses too—they include a margin to remain viable. Ofgem requires major suppliers to publish their earnings and EBIT annually to ensure transparency.

What Drives Wholesale Gas Price Volatility?

Wholesale gas prices change regularly. Here are the main factors:

1. Seasonal Demand

Gas demand spikes in winter due to heating needs. Colder weather means higher prices, while mild winters reduce demand and prices.

2. Industrial Usage

As manufacturing and service demand varies, so does industrial gas usage. A slow industrial sector can suppress gas prices.

3. Currency Movement

The UK imports a large share of its gas. A weaker pound makes imports more expensive, pushing up wholesale prices. A stronger pound can help lower them.

4. LNG Market Trends

Shifts in global LNG production and shipping costs—particularly from the USA and Qatar—impact UK gas supply and price.

5. Renewables Performance

When wind and solar output drops (due to calm or overcast weather), the UK falls back on gas-fired power stations to generate electricity. This increased demand raises gas prices.

6. Power Station Closures

As coal plants are decommissioned, more electricity is generated using gas. This raises long-term demand and contributes to higher prices.

7. Geopolitical Events

Conflicts (like the Russia-Ukraine war) or sanctions in gas-exporting countries cause market panic, restrict supply, and push prices higher.

How Do Gas Prices Impact Electricity Prices?

In the UK, electricity prices are closely tied to gas. That’s because:

Around 40% of UK electricity is still generated using gas-fired power stations (CCGTs)

Under the marginal pricing model, the most expensive form of generation sets the market price

So even when renewables are in use, the final price of electricity can still be driven by gas.

In times of high gas prices, electricity follows suit. This was clearly seen during the energy crisis of 2022–2023, when wholesale gas and electricity prices spiked in tandem.

What Can Your Business Do?

Managing gas price volatility comes down to smart planning:

✅ Fix your rates when market conditions are favourable

✅ Review your usage and cut waste where possible

✅ Monitor market updates to avoid surprises at renewal

Even if your business doesn’t use gas directly, understanding these trends can help you plan better for electricity and bundled utility costs.

How Bright Edge Helps

At Bright Edge, we:

• Monitor the market to time your contracts for best value

• Benchmark rates across more than 25 trusted UK suppliers

• Provide tailored switching support with zero disruption

Whether you use gas directly or just want to avoid unnecessary exposure through electricity pricing, our team helps you stay informed, agile, and in control.

Want to lock in better rates or explore your options?

Send us your latest bill, we’ll review your contract, identify savings, and help you secure a smarter deal.

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