Gas and oil prices are set to increase because of the war in Ukraine, energy providers said yesterday.

Wayne Caines, the president of Belco, said the company’s fuel adjustment rate, or FAR, will increase by the start of next month.

He added that the increase could be reflected in power bills – although FAR hikes could be balanced out by Belco’s efforts to help customers save money.

Mr Caines said: “It is also important to note that the FAR is a cost recovery mechanism and all cost increases, as well as any savings due to a reduction in Belco fuel costs, are passed on to customers.”

He was speaking as oil prices around the world have increased due to the conflict between Russia and Ukraine.

Mr Caines said that the fuel adjustment rate, which is approved by the Bermuda Regulatory Authority, reflects the total cost to deliver fuel to Belco’s central plant.

It combines the cost of fuel with the cost of taxes from the Bermuda Government.

Mr Caines said that price hikes were necessary to keep Belco afloat when compared to larger utility companies.

He said: “As a small remote island utility, it is difficult to realise economies of scale that larger utility companies serving much larger markets can achieve.”

Mr Caines added: “Belco periodically carries out competitive bidding processes in order to establish reliable sources of fuel at the most competitive prices.

“The company may also from time to time take advantage of any favourable market prices through fuel hedging with 100 per cent of any opportunistic savings or reductions in fuel costs being passed onto consumers.”

Mr Caines insisted that Belco’s transition to renewable energy will “reduce our exposure to price shocks in the oil market” in the long term.

Jermaine Simons, of Rubis, said that the cost of propane had increased by 11.6 per cent and had gone up nearly every day since February 24.

He added that he could not share the price that Rubis bought gas, but said that the price of petrol as of February was $2.341 per litre or $8.861 per US gallon.

Mr Simons said that the price of oil was expected to change next week, but could not say which direction it would go or by how much.

He said: “Market trends have continued an upward climb but the bottom price for Bermuda hasn’t been determined yet.”

But Mr Simons added that, because the island’s gas storage must be replaced every two months because of consumer demand, it could be “impossible” to avoid a hike in the cost of importing gas.

“Whilst one may speculate on when the best possible day would be to procure a replenishment order based on pricing trends, the critical factors are that you have to reduce the impact of shipping and freight charges by maximising the cargo load whilst also ensuring that the island does not stock out.”

He added: “Bear in mind, one cannot overstock on bulk propane in anticipation of large price fluctuations due to external conflicts or disasters.

“There has to be sufficient storage capacity to accommodate any incoming replenishment order.

“In short, it may be impossible to avoid higher procurement costs if we wish to maintain security of supply.”

Mr Simons said that there was historic precedent to show that war could drive the price of energy up, such as conflicts in the Middle East as far back as 1973 affecting the price of propane.

He admitted that, because this was the largest European conflict since the Second World War, he could not predict how the price of gas would change within the coming months.

But Mr Simons added that Europe would be forced to find an alternate supply of oil – a difficult feat that would push the price of gas even further.

He said: “Europe doesn’t have enough pipeline infrastructure to move the major petroleum products, especially natural gas from the coastal storage depots to the interior, or places far from the coast.

“Also, a significant number of export facilities in the Western Hemisphere are operating at near-capacity, so demand is going to outstrip supply, unless nations like Saudi Arabia are willing to increase their production.”