Electricity and oil prices are ‘out of control’ in Germany as well

Tariffs for electricity and heating oil are also recording an unprecedented rise in Germany. New increases are expected in 2022. Is the market or the state responsible?

Can the pandemic be to blame for everything? The truth is that after the global economy shrank significantly in 2020, the first signs of recovery had triggered unexpectedly high energy demand around the world. Within a few months, the wholesale price of oil in Europe multiplied, reaching historically high levels. Apart from the high demand, however, there are other factors that contribute to the rise in prices: reduction of gas reserves in most markets, restrictions on exports by producers, but also the “salty” taxation of carbon dioxide emissions.

According to the financial portal Verivox, the cost of households for natural gas has tripled since January 2021. In the spot markets, where short-term contracts are traded, prices have even increased sevenfold! Today the price per kilowatt hour has reached 150 euros, while under normal conditions it does not exceed 10-25 euros. Verivox estimates that for a household with an annual consumption of 20,000 kilowatt hours, the cost of natural gas in December 2021 is around 1,704 euros, on an annual basis, while at the beginning of 2021 it did not exceed 1,162 euros.

Almost 50% increase in gas, 40% in oil

If these estimates are confirmed, it will be an increase of 47%. “In 2022 we will see new price increases,” recalls Thorsten Stork, a Verivox partner. “From January, we will see the special carbon duty levied on fossil fuels rise from 25 to 30 euros per tonne. For January and February 2022, most energy providers have already announced increases of up to 23%, on average, with an annual consumption of 20,000 kilowatt hours, this increase entails an additional financial burden of 339 euros.

A similar development is observed in the prices of heating oil. In January 2021 the price – excluding taxes – for 100 liters of oil was 49 euros, while today it reaches 69 euros. This is an increase of 41%. “The price of oil usually follows the prices of raw materials,” said Torsten Stork. “During the pandemic they had fallen to historic lows. At the moment they are at levels higher than they were before the crisis. With the increase in carbon taxation, the upward trend is likely to continue.” Eventually, the electricity bill goes up and increases by 18.4% in the period from January to September 2021. For a household with an annual consumption of 4,000 kilowatt hours, this increase entails an additional cost of 215 euros, on an annual basis. .

The tax burdens are great

The good news: At the end of 2021, the fixed fee for renewable energy that was imposed years ago in Germany with the aim of financing wind farms and other alternative energy sources was reduced from 6.5 to 3.7 cents per kilowatt hour. For a household of three people with an annual consumption of 4,000 kilowatt hours, this reduction saves 133 euros, on average. At the same time, however, network usage fees show a record increase of 4%. It is noted that in Germany most of the final price is due to taxes, special fees and transit fees. The fuel market itself and its distribution correspond to only 25% of the final price. In short, the most important cost factor is the state itself.

In the recent past many consumers have resorted to the solution of an alternative or discount provider. Recently, however, many of these providers have filed for bankruptcy, as they had attracted customers with very low tariffs and can no longer meet the increased costs for immediate delivery purchases. In this case, of course, the consumer is not left without electricity. According to the current legislation, it is automatically transferred to the main provider of its area, which is usually a municipal company. However, in this case it is usually included in the invoice for new customers, which is rather “stingy”. For example, in Cologne’s Rheinenergie municipality, an old customer pays 30.76 cents per kilowatt hour, while a new customer pays 72.8 cents. The reason for this unfavorable treatment: in Cologne alone it is estimated that the bankruptcy of alternative providers affects tens of thousands of consumers. If all of them are looking for a new provider in the municipal company, then it will have to pay a particularly high cost in the immediate delivery markets to quickly secure a quantity of energy, which until recently it did not consider necessary.

Increased costs for industrial customers as well

Large increases are also waiting for industrial customers. Many had resorted to alternative providers or avoided committing to long-term contracts. The financial review Handelsblatt cites the extreme example of a small and medium-sized enterprise from the state of North Rhine-Westphalia, with an annual turnover of 2 billion euros. “The price increase was so great in the third quarter of the year, that we thought it was unlikely to increase further,” said the company spokesman, who later admitted that he “played and lost” in the choice of provider, resulting in the final bill for the company’s factories in Germany now amounts to around five million euros. In previous years, the corresponding amount did not exceed three million euros. The result: more and more small and medium-sized enterprises are seeking state aid to cope with the difficult times.

Klaus Ulrich

Edited by: Giannis Papadimitriou

Source: Deutsche Welle