Since February 2026, military strikes on Iran have disrupted Strait of Hormuz shipping (~20% of global oil and gas), increasing UK wholesale gas prices over 90%.1Cornwall Insight forecasts the July 2026 Ofgem cap at £1,801, around +10% on the current cap.2Stifel analysts estimate a sustained closure could push it to £2,500.3Resolution Foundation estimates the combined energy-bill and motor-fuel rises could leave a typical household £480 worse off in 2026.4
This dashboard uses PolicyEngine UK to estimate the distributional impact of five price-shock scenarios.5 Electricity and gas consumption are imputed from the Living Costs and Food Survey and calibrated against the National Energy Efficiency Data-Framework (NEED) 2023 aggregates. Under current Ofgem rules, the cap is £1,641 (dual-fuel, direct-debit, typical consumption); all figures are annual values for the 2026–27 fiscal year.6 The Impact scenarios tab models baseline burden and shock effects. The Policy responses tab evaluates five interventions. The Methodology tab explains the approach and data sources.
Baseline energy burden
Household energy bills are split between electricity (56% of spending) and gas (44.0%). Gas prices are more volatile because they are directly linked to wholesale markets, so a geopolitical shock feeds through primarily via gas. Electricity prices also rise because gas-fired power stations set the marginal price. ONS estimates that the lowest-income decile spends roughly 7% of income on energy, compared with around 2% for the highest.7 The figure below shows the baseline energy burden by decile, tenure and household type.
Price shock scenarios
We model five scenarios in which the Ofgem price cap rises from the current level of £1,641 (dual-fuel, direct-debit, typical consumption). Ofgem resets the cap quarterly using observed wholesale gas and electricity costs, so a wholesale-price shock passes through to household unit rates at the next cap update, raising the £/kWh paid for every unit of energy consumed. The largest scenario, "Q1 2023 peak" (£4,279), is the cap level Ofgem announced for January–March 2023, the peak of the 2022–23 energy crisis.8
All charts include a static estimate (no change in consumption) and a behavioural estimate in which each household responds at its own income decile's short-run price elasticity per Priesmann and Praktiknjo (2025): −0.64 for the lowest decile, rising monotonically to −0.11 for the highest. A population-mean elasticity (e.g. Labandeira et al. (2017)'s −0.15) would average away the progressivity that matters — lower-income households are forced to cut sharply while higher-income households barely respond. The spend response uses the canonical constant-elasticity form (pnew / pold)1 + ε, which remains physically admissible at all ε ∈ (−1, 0] and shock sizes (unlike the linear first-order approximation, which produces negative consumption at the +161% scenario). Constant-elasticity extrapolation to +161% (Q1 2023 peak) is outside the validated band for these estimates; the extreme-shock results are illustrative, not predictive. Priesmann and Praktiknjo estimate the decile pattern from German gas demand; applying it to combined UK electricity + gas consumption assumes the UK income gradient mirrors Germany's and that electricity responds at the same elasticity as gas — UK electricity is typically estimated less elastic than gas, so the behavioural bill savings reported here should be read as an upper bound on consumer adjustment.