Dependence on oil and gas costs Scottish industry almost £2 billion

Scotland’s dependence on oil and gas has left its industry facing nearly £2 billion (£1.8 bn) in additional costs since the energy crisis began, new analysis by the Energy and Climate Intelligence Unit (ECIU) has found. 

Urban centres in Glasgow and Edinburgh, the Highlands and Islands and the industrial hub of Aberdeen saw the highest overall increases in the non-domestic sector. Respectively, these areas spent an extra £800m, £740m, £560m and £390m over the crisis because of increased oil and gas prices. 

These findings, which come at a time when many energy intensive industries in Scotland are still struggling with high industrial energy costs, such as the Mossmorran chemicals plant which has now closed, highlight that Scottish industry remains vulnerable to volatility in international energy markets – more than four years on since the energy crisis began.

The UK has some of the highest industrial energy costs in Europe, largely because of its relative dependence on gas, according to a report from industry body Steel UK published in September last year. [1] Gas sets the price of electricity approximately 85% of the time. [2]

The research also highlighted the continuing impact of the energy crisis on Scottish households, finding that excess energy costs have reached £5.8 billion – averaging around £2,260 per home. This total excess cost is around 70% of a typical Scot’s annual spend on food and non-alcoholic drinks. 

Residents in some of the most deprived areas of Scotland, where average household incomes are lowest – including Dundee– have paid a greater proportion of their income on excess energy costs than households in more affluent areas. 

Cumulatively, the total cost to the Scottish economy is estimated to have been £11 billion – just less than three times what the Scottish government proposes spending on education (£4bn) in Scotland over 2025-26.

Previous analysis by the IMF has suggested that the UK’s dependence on imported fossil fuels left it the worst hit economy in western Europe by the spike in prices which followed the Russian invasion of Ukraine, while the Energy Crisis Commission has warned that the UK as a whole remains “dangerously unprepared” for future price shocks. [3] Gas prices had reached eleven-month highs in recent weeks with colder weather and geopolitical uncertainty leading to fears for global supply.

Commenting on the energy crisis in Scotland, Professor Tavis Potts, Co-coordinator at the Just Transition Lab at the University of Aberdeen, said: “Anybody who has paid a gas bill over the past few years – businesses and families alike – has felt the impacts of Scotland’s reliance on oil and gas. Drilling for more North Sea gas won’t fix this underlying problem or lower bill costs for consumers or industry as output is too low to influence prices that are set in  global markets. With most of the North Sea gas resource having been extracted, future marginal finds could only supply a fraction of the UK’s future demand – and it won’t make any difference to bills with increasing reliance on imports. 

“To shield energy consumers from future energy price shocks in an increasingly uncertain world, lowering demand through renewables and other net zero technologies is key. Wind power cut UK wholesale day-head prices by a third last year and with recent offshore wind auctions delivering at scale, this effect is set to increase.”

Michael Matheson MSP, Falkirk West Constituency: “This report lays bare the reality for households and industry across Scotland: energy bills are at record highs and will keep rising unless we reduce our dependence on internationally sourced carbon-intensive fuels.

“The United Kingdom is increasingly exposed to volatile global markets, especially as refineries, like Grangemouth, close before a clear plan is in place to transition from a carbon-based economy to renewables.

“Without cutting costs for households and accelerating investment in wind, solar and hydropower, this trajectory will continue. The time for debate is over. The time to act is now.”

Mercedes Villalba, Labour MSP for the North East of Scotland, said: “The ECIU’s findings are damning. They reveal the immense cost of our continued dependence on international  fossil fuels for households across Scotland. What’s more, the ECIU makes clear that working-class communities bear the brunt of our government’s failure to accelerate a just energy generation.

Wholesale gas prices began to rise in 2021 as the global economy recovered from the effects of the Covid pandemic before spiking following the Russian invasion of Ukraine. Although the UK’s growing renewables capacity is helping to reduce the amount of time that gas is setting power prices, gas continues to do so the majority of the time. 

For example, when UK day-ahead gas prices spike so do electricity. [4] There have been calls to reduce policy costs on electricity for industrial companies, although many energy intensive users are already exempt from the majority of these costs and compared to France and Germany, UK heavy industries pay less. [5] 

Measures designed to bring down network costs faced by industries were introduced by the UK Government in the autumn, including additional discounts for energy-intensive industries, and are due to come into effect in April 2026. [6] However, there has been some criticism that the eligibility for these support schemes is too narrow. [7] 

ENDS 

Notes to editors: 

The analysis is available to download here. 

1. UK Steel: https://www.uksteel.org/steel-news-2025/new-report-uk-industrial-electricity-still-uncompetitive-steel-industry-sets-out-plan-to-fix-it
2. ECIU: https://eciu.net/analysis/reports/2025/marginal-gains-how-wind-is-pushing-gas-out-of-the-power-market-and-cutting-costs
3. The Guardian: https://www.theguardian.com/money/2022/sep/01/energy-crisis-uk-households-worst-hit-in-western-europe-finds-imf; Energy Crisis Commission:  https://energycrisiscommission.uk
4. ECIU: https://eciu.net/analysis/reports/2025/marginal-gains-how-wind-is-pushing-gas-out-of-the-power-market-and-cutting-costs
5. UK Steel: https://www.uksteel.org/electricity-prices
6. DESNZ: https://www.gov.uk/government/news/british-businesses-to-save-over-400m-a-year-as-government-slashes-electricity-costs
7. The Times: https://www.thetimes.com/business/energy/article/scheme-to-cut-manufacturers-energy-costs-will-come-too-late-xg7829z99? 

For more information or for interview requests:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net