North Sea drilling won’t cut UK energy bills, new analysis warns

Calls to ramp up drilling in the North Sea are growing as the Middle East crisis rattles global energy markets. Supporters argue producing more domestic oil and gas would shield Britain from price shocks and bring down household bills.

But new analysis suggests the impact would be minimal.

Even under an aggressive scenario where the UK maximised North Sea extraction and redistributed all tax revenues to consumers, the typical household would save no more than £82 a year — a fraction of current bills. The findings challenge a central claim in the political push for expanded drilling.

Why UK households pay so much

The structure of Britain’s energy market is the main driver of high prices.

About 41% of a typical dual-fuel household bill comes from wholesale energy costs. The rest covers network infrastructure, supplier operating costs, policy levies and VAT.

Crucially, electricity prices are usually set by the most expensive generator needed to meet demand — typically gas-fired power plants. That means even electricity produced cheaply from wind or solar is priced according to global gas markets.

The result is a system highly exposed to geopolitical shocks. Around 85% of UK homes still rely on gas boilers for heating, far more than in many European countries. Combined with Britain’s poorly insulated housing stock, this leaves households vulnerable to spikes in international fossil fuel prices.

Renewables offer bigger savings

The analysis found that maximising North Sea production would reduce annual bills by between £16 and £82 — roughly 1% to 4.6% of the current £1,776 average household bill reported by Ofgem.

A faster transition to renewable energy could deliver far greater savings.

If electricity prices were set primarily by cheaper renewable generation rather than gas, households could save between £105 and £331 a year. Additional reforms shifting policy costs from electricity bills into general taxation could increase savings to around £441 annually.

The conclusion is blunt: drilling more oil and gas would leave Britain exposed to global fossil fuel shocks. Cutting reliance on gas — through renewables, insulation and electrified heating — offers far larger and longer-lasting relief for consumers.

Would more North Sea drilling lower UK energy bills? Our analysis says no