Europe is suffering from a sudden bout of energy price fever. Since April, on the wholesale markets, the price of gas has quadrupled: a first doubling until August, followed by the same phenomenon, much more violent, for a month.
For European economies, in the midst of a post-Covid-19 recovery, the shock is severe. In Spain, electricity bills have increased by 37% in one year. In Italy, the announcement at the beginning of September of a dizzying rise in bills for the last quarter (+ 30% for gas and + 40% for electricity) raised serious concerns. In Belgium, where energy prices were already among the highest in Europe, it is estimated that, in the country, one in five households is in a situation of “energy poverty” before winter, a proportion which climbs to one in four in Wallonia.
Governments across the continent are forced to step up. In Spain, the state has reduced VAT and taxes on electricity bills. In Italy, Thursday, September 23, the executive released 3 billion euros for a series of emergency measures, which will amount to erasing energy increases for 3 million low-income households and for very small businesses, as well. than to introduce temporary reductions in VAT for all. In France, an energy check of 100 euros must be paid in December to nearly 6 million households. Belgium, Greece and Portugal are also discussing aid measures.
The political leaders want to be reassuring, but their sentences tend to betray a very serious concern. “Absolutely no one is talking about being short of electricity or that people can no longer heat their homes”, recently explained to the House of Commons Kwasi Kwarteng, the British Minister for Industry.
Events in Spain
In its wake, the gas pushes the other hydrocarbons upwards. The price of coal, which is still used in many power plants, has increased two and a half times in a year. A barrel of Brent has doubled over the same period, to 76 dollars (about 65 euros). At the pump, unleaded gasoline climbed 26 cents to 1.67 euros per liter.
The first symptoms of this energy fever appeared in late spring in Spain, a country where many households have bills indexed to wholesale prices. From around thirty euros per megawatt hour at the start of the year, the price of electricity had tripled, to more than 90 euros in June. Worried, the Spanish government, led by the socialist Pedro Sanchez, temporarily lowered the VAT on electricity from 21% to 10%, in order to reduce the bill.
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