Are energy bills set to continue rising or will they come down?

Although the oil price may have peaked for now, the impacts of its unprecedented rise will continue to be felt. Although prices at the pump have begun to fall, the impact on energy costs is likely to persist.

Why is this the case when the cost of oil is falling? It's all to do with the good old law of supply and demand and Britain is increasingly dependent on importing its gas from Europe in the wake of dramatically declining North Sea gas production. Given that 40% of Britain's electricity is generated from gas, our demand for gas is as strong as ever and therefore Britain has little choice but to pay the European prices. The Government's target to abolish fuel poverty for vulnerable households by 2010 looks very unlikely and by Christmas over 6 million households will be spending over 10% of their income on paying for energy.

On the supply side it is estimated that for every barrel of oil discovered, three barrels are consumed and oil production will peak within the next two years. This will create a delicate dilemma for oil producers and governments as the cost of discovery and production of oil will rise. It has been widely accepted that oil reserves we know about will only last another 40 years or so.

Whilst we can get a little comfort from the fact oil prices are coming down, the longer term prognosis doesn't look encouraging. On both a government policy and individual level, we have to accelerate moves towards being independent of oil and gas and harnessing renewable energies where at all feasible.