Claims that drilling in the North Sea will significantly save households money are “sheer fantasy”, experts have warned as analysis showed renewables could cut bills by hundreds of pounds.

Analysis by the University of Oxford Smith School showed a UK fully powered by renewable energy, with electricity coming from clean sources and people using technology such as electric heat pumps for their home heating, could save households up to £441 a year on bills.

In contrast, maximising oil and gas extraction from the North Sea would save households just £16 to £82 a year – and that saving would only be delivered if the tax revenues collected from fossil fuel companies were redistributed to families to offset their energy bills.

If the Government did not use the tax revenues it collects from North Sea drilling solely to help lower household bills, there would be “no discernible benefit” to consumers at all as oil and gas prices are set by volatile international markets, the analysts said.

Dr Anupama Sen, co-author and head of policy engagement at the Smith School of Enterprise and the Environment, said: “The idea that draining the North Sea would make the UK more energy secure or significantly save on household bills is sheer fantasy.

“We show that regardless of the remaining lifetime of North Sea oil and gas, a ‘drill baby drill’ approach to extraction would actually cost households more money versus continuing on our path to clean energy.”

The analysis comes amid soaring energy prices as a result of the US-Israeli war on Iran which has closed the Strait of Hormuz – a key shipping route for oil and gas supplies – roiling energy markets.

Energy costs look set to jump in the next price cap in the latest blow for households, particularly those on low incomes, who have been hit by the Covid-19 pandemic and Russia’s invasion of Ukraine which have led to high and volatile prices.

The UK Government’s reaction to the latest spike in fossil fuel prices has been to double down on the push to clean energy, while hinting at measures to ease pressure on households, such as cancelling planned fuel duty rises later this year.

It has announced that it will make plug-in solar panels for people to put on balconies and outdoor spaces available in the UK for the first time and is bringing forward the latest auction for contracts to supply electricity at fixed prices from renewables such as solar farms and offshore wind.

But there have been calls from the Tories and Reform UK to increase supplies of oil and gas from the North Sea, and to bring down bills by scrapping measures to help the UK shift to a “net-zero” clean economy, such as new renewables and heat pump subsidies.

US President Donald Trump has also weighed into the debate, repeatedly criticising wind power and urging the British Government to focus on drilling in the North Sea, despite it being a declining oil and gas basin.

The analysis found that if the remaining North Sea oil and gas resources were fully exploited and the revenues from a “realistic” tax take were directly redistributed to households, it could save £82 on an average bill.

If the Government scrapped the windfall tax on North Sea oil and gas company profits, those annual savings – if remaining taxes were handed over to households – would fall to just £16.

However, if all UK households switched to renewable energy, bills could be reduced by £105 to £441 depending on the extent of electrification and how bills are designed.

The analysis said the savings are based on energy prices in January before the US and Israel launched their attack on Iran, with oil and gas prices lower than they are now, and are therefore “conservative” estimates of the benefit of renewables.

And they are recurring once the system switches over, while North Sea oil and gas are a finite resource.

If electricity is dominated by renewables, they will set the price of power – unlike today’s world, where it is mostly set by gas – bringing down bills by £105 for those on dual-fuel bills.

But if households electrify, for example by replacing gas boilers with heat pumps, they could save £330 a year on their bills, and if electricity bills were rebalanced so that policy costs were taken into general taxation, it would deliver savings of about £441 a year.

Co-author Cassandra Etter-Wenzel said: “Achieving this requires upfront investment – especially for heat pumps and insulation – and therefore depends on effective subsidy and financing mechanisms, particularly for low-income households.”

Dr Sen added: “Heat pumps are particularly important for reducing bills because they are much more efficient than gas boilers”, producing about three units of heat for every unit of electricity they use, compared to less than one unit of heat per unit of gas in boilers.