Experts on higher taxes
“The gas crisis is not over yet”
By Christina Lohner
September 19, 2023, 7:05 p.m
The federal government wants to raise the VAT on gas sooner than planned. Consumers therefore have to prepare for significantly higher costs. And beyond that, there is a risk of further price jumps.
The CSU in the Bavarian election campaign is already talking about breaking its word, and the matter is also clear for Federal Finance Minister Christian Lindner: From circles in his ministry it is said that the entire federal government is supporting his plans to increase the VAT on gas from 7 to 19 percent again from January increase – three months earlier than planned. Market experts assess the project differently, but one thing is certain: the time of price increases is not yet over.
Gas market expert Sebastian Gulbis is extremely critical of abolishing the VAT reduction in the middle of the heating season: around 80 percent of gas consumption by household customers occurs between October and March and more than half of that occurs between January and March, as the partner at the energy consulting company Enervis im Conversation with ntv.de explained. A higher VAT from January would therefore affect a significant part of consumption in the coming winter. According to Gulbis, the government should wait until March. “The timing is unfortunate; higher taxes from January would hit low-income households hard.”
Because many customers will still be stuck in expensive contracts at the beginning of next year, as Gulbis emphasizes – especially all those who concluded their contracts during the energy crisis, i.e. at high prices, whose terms have not yet ended. The gas price brake, which Economics Minister Robert Habeck wants to extend until Easter, may still be in effect until the end of March. This caps the price for private customers at 12 cents per kilowatt hour, but only for so-called basic needs, 80 percent of previous consumption. And anyone who has a cheaper tariff would also feel the higher VAT on basic needs.
“Providers will completely pass on higher taxes”
The end of the VAT reduction means a price increase of around eleven percent on average, or 200 to 300 euros more per year for a family of four with a consumption of 20,000 kilowatt hours. The range is large because consumers are currently paying very different prices – some are now paying less than the current gas price cap, but for many the labor price is even higher. On the other hand, the accounting levy is set to zero, so that the price increase would be around five to six percent rather than eleven percent. However, only if the providers pass this loss on to the customers.
Either way, Tobias Federico, managing director of the consulting company Energy Brainpool, thinks the price surcharge is bearable, as he said in an interview with ntv.de. Although prices are still higher than before Russia’s war of aggression against Ukraine, they have now fallen sharply again. New customers currently received offers of 7 to 9 cents per kilowatt hour. Gulbis, on the other hand, would find targeted support for low-income households to be the most sensible, for example in the form of a cash payment like in other countries.
Both market experts agree that the providers will pass on the higher VAT in full to consumers – not only to new but also to existing customers. “Taxes are typically excluded from price guarantees,” says Gulbis.
Consumers should continue to save
Gulbis and Federico also agree that the elimination of the VAT reduction is not enough to encourage consumers to save on gas. “They have to be motivated in other ways,” says Gulbis. In his estimation, the majority saved last winter not primarily because of money, but rather to make a contribution to combating the impending gas shortage and to emancipating Russian gas. In Federico’s eyes, however, the still high price level is reason enough for consumers to continue saving.
It is difficult to predict how the gas price will develop next winter. The initial situation is good with more and more LNG terminals and full gas storage facilities. But whether there is a risk of a new price increase or even a shortage depends crucially on the temperatures. And we need to continue saving on consumption. “The gas crisis is not over yet,” emphasizes Gulbis.
From next spring, Federico expects prices to be just six to eight cents per kilowatt hour, as wholesale prices will continue to fall. However, according to Gulbis’ assessment, the market will remain volatile in the coming years and renewed price peaks cannot be ruled out. The expert says that there should then be enough LNG terminals in operation worldwide. But while in this country liquefied gas was only a supplement to pipeline gas before Russia’s war of aggression, “we are now in greater competition with the world market.” This means that global developments will also have a greater impact on the European gas price. An economic recovery in China, strikes in Australia’s LNG industry or the weather in South America could drive the price up – or push it down.
“The market will remain volatile, although on average at a lower level,” predicts Gulbis. Germany is unlikely to protect itself against this risk with long-term supply contracts because natural gas contracts beyond 2045 would contradict climate protection goals. “We are currently becoming more and more attached to the LNG spot market and see a lack of willingness for long-term contracts.”