Box B: The Impact of the Oil Price Shock on UK Household Living Standards

National Institute of Economic and Social Research ()

National Institute Economic Outlook, 2026, issue Spring, 51-55

Abstract: The rise in global energy prices following the conflict in the Middle East will reduce UK living standards. A key question is how that loss will be distributed across households. In this Box, we examine two channels through which the energy shock affects living standards. First, we estimate how an energy price shock is likely to affect the shape of the UK household income distribution. Second, we examine how exposure to higher energy prices differs across income groups because households spend their money in different ways. The combined effect of these two channels helps identify which households are likely to be most vulnerable. We conclude with a discussion of the policy options implied by the analysis.

Date: 2026
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