Electricity, oil and gas: what helps against high energy prices?


Status: 10/28/2021 8:04 a.m.

In view of the skyrocketing energy prices, the federal government is relying on more market and selective support. Other countries rely on state intervention. Medium-sized companies and some experts are calling for this also for Germany.

By Lothar Gries, tagesschau.de

While France wants to pay out 100 euros to all low-income citizens by the end of the year to compensate for the high energy prices, the federal government is rather undecided. So far, the federal government only wants to relieve consumers directly by lowering the so-called renewable energy surcharge. It will be reduced to 3.72 cents per kilowatt hour in the coming year. An average three-person household with an annual consumption of 3500 kilowatt hours of electricity should save 98 euros a year. Further measures, such as capping gas prices for end consumers, as decided by the French government at the beginning of October, are not planned in this country.

There are plans in the Federal Ministry of Economics to relieve financially disadvantaged citizens through housing benefits. But such a measure – if at all – will only be decided by the future government.

Energy prices put a brake on upswing

There is no lack of calls for help, appeals and suggestions to protect private households and companies from the skyrocketing energy prices. Because the current price shock is becoming a threat to the overall economic recovery.

The German economy is expected to grow much more slowly this year than economic researchers and the government had expected in the spring. The federal government lowered its forecast for 2021 this week and now expects gross domestic product to rise by 2.6 percent – almost one percentage point less than forecast in April. The leading economic research institutes recently revised their forecasts downwards even more sharply.

Price rally could continue

In addition to the well-known delivery bottlenecks, this is also due to the sharp rise in costs for oil, gas and electricity. According to a recently published joint forecast by the economic research institutes RWI, DIW, Ifo, IfW and IWH, economists expect energy to be almost ten percent more expensive this year. In 2022, prices are likely to rise by around six percent. In fact, the price of a barrel of Brent oil has doubled within a year. The cost of one megawatt hour of electricity even increased tenfold. The gas price rose by 130 percent, that for coal by around 350 percent.

And the rally could go on. “If it gets very cold in the northern hemisphere, there could be further temporary price increases on the energy raw material and electricity markets,” warns the credit insurer Hermes. “But even with a mild winter, countries could be inclined to stock up on their stocks as a precaution.”

“Do not completely switch off” the market

EU Energy Commissioner Kadri Simson has therefore presented a number of proposals that EU countries can apply without violating European competition rules. This includes direct payments as in France, but also tax breaks and subsidies for small businesses. “It is important to support vulnerable citizens and European businesses as we come out of the pandemic and start the recovery,” Simson said.

The extent to which Germany will use these instruments has not yet been determined. Stefan Kooths, head of the forecast center at the Kiel Institute for the World Economy, has already warned against trying to cushion the energy price shock with subsidies. “There must now be the attention of economic policy that we do not get significant distortions in the slipstream of these energy price increases.” Because there is a risk of artificially keeping uncompetitive companies alive.

Chancellor Angela Merkel also advocates reacting prudently to the rise in energy prices. On the sidelines of the EU summit last week in Brussels, she said that Germany would “not switch off the market completely”, but would instead provide more market. To this end, further social support measures could be taken, such as improving housing benefits, said the Chancellor.

Refund part of the CO2 tax

Claudia Kemfert, energy economist at the German Institute for Economic Research (DIW), finds it “fundamentally sensible” to relieve the public. She advocates reimbursing part of the CO2 tax to those on low incomes. That would lead to a significant relief, said Kemfert. On the other hand, she thinks little of a price cap like the one in France. “Something like that doesn’t work in Germany,” she recently told the SWR.

Even general tax cuts did not automatically lead to lower oil, electricity or gas prices because the utilities could overcompensate for such a measure. “In the end, the prices are higher than before,” said the expert. This also means that the income that the state needs for an energy turnaround is missing.

Nevertheless, medium-sized companies in particular insist on help. The Mittelstandsverband (BVMW), for example, is calling for the mineral oil tax to be reduced in order to relieve consumers and companies. “From the point of view of the middle class, the mineral oil tax should be reduced temporarily and the commuter allowance increased noticeably,” said the chief economist of the BVMW, Hans-Jürgen Völz, to the newspapers of the Funke media group.

A fundamentally new energy policy

The alliance for fair energy transition, to which several associations of medium-sized companies belong, even calls for a fundamentally new energy policy. Financing the energy transition from the federal budget is the best way to create comparable competitive conditions with foreign competitors. This would be more socially just if it would take the pressure off companies significantly in a difficult situation and also trigger an economic stimulus. “

However, energy prices like before the corona pandemic should no longer exist anytime soon. This is mainly due to the fight against climate change. For example, CO2 pricing will make fossil energy sources more expensive in the long term and thus burden consumers.


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