The main thing about the energy crisis in Europe - in four graphs.  Which countries have been hit the hardest?  How much have the prices for heating and electricity actually increased?

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Dependence on Russian gas Europe reduces due to the supply of liquefied natural gas. Pictured is a floating LNG storage facility in the port of Eemshaven, the Netherlands

In early September, tens of thousands of people took to the streets of Prague to protest against the sharp rise in prices for gas, electricity, gasoline and energy in general. There have never been such mass actions in other countries, but this winter they seem quite likely: the energy crisis affects the whole of Europe, and inflation, caused, among other things, by rising gas prices, reached in 2022 record values. At the same time, despite the common EU energy market, residents of different countries feel the rise in wholesale prices in very different ways: somewhere, the cost of energy for them has more than doubled, and somewhere – only by a few percent. To show which countries, other than the Czech Republic, are feeling the crisis most acutely, Meduza compared European energy inflation figures and compared them to the total share of energy expenditures in household budgets.

Indeed, there have not been such gas prices in Europe for decades. Even with many years of inflation

A significant increase in prices for all energy carriers began in mid-2021 against the backdrop of the global economy emerging from the pandemic. In 2022, this growth continued and escalated due to the outbreak of the war in Ukraine, against the background of which the commissioning of the Nord Stream 2 gas pipeline was canceled, and gas pumping through Nord Stream 1 first decreased, and by the beginning of autumn completely stopped. By the end of the first quarter of this year crude oil prices have doubled, coal prices have tripled, and natural gas prices have more than quintupled compared to the beginning of the previous year.

The multiple rise in gas prices in Europe well shows the regional nature of the crisis and its connection with the political, rather than the global economic situation. In the US, which does not depend on Russian gas supplies, the rise in prices against the European background is almost imperceptible.

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The chart above reflects exactly the exchange (spot) cost of gas, at which it can be bought or sold in bulk at certain exchange points. The average consumer learns about the rise in the cost of gas not on the stock exchange, but first of all in his payment receipt for heating and electricity (part of which is generated by gas-fired CHP plants), at a gas station and, ultimately, on store shelves.

Fortunately, even a fivefold increase in energy prices never leads to a fivefold increase in the cost of gasoline or heating. First, on the way to the consumer, the wholesale price is “diluted” with other costs, which means that the share of cost growth in the final price for the consumer decreases. Secondly, any “flow” of inflation from wholesale to retail does not occur instantly. How exactly the wholesale price of gas affects the growth of energy prices for the consumer is estimated by economists using special coefficients – they show the share of consumer inflation from inflation in the wholesale market. These shares are usually stable from year to year in one country, but can vary greatly from country to country.

The reasons why retail prices in different countries reflect changes in wholesale prices differently are discussed in detail in IMF report, which is dedicated to energy inflation. Quote:

Firstly, The ratio of wholesale prices to final retail prices varies from country to country, reflecting the structure of taxes and fees, which do not necessarily move in parallel with wholesale prices. For example, duties on fuel are typically levied per liter of fuel, so a 1% increase in wholesale prices usually results in less than a 1% increase in retail prices, and the extent of this dilution varies from country to country depending on the level of duties. Moreover, since the fall of 2021, governments have taken various measures to smooth retail energy prices, such as reducing value added tax (VAT) or excise taxes, which have contributed to differences in observed transmission across countries.

Secondly, various regulatory frameworks, and government intervention affect the frequency or magnitude of utility price changes. For example, during the period 2017-2021, retail electricity prices were updated on average less than twice a year in Hungary, Croatia, Bulgaria, Lithuania, Slovakia and Poland, while in Finland, Latvia, Belgium, Estonia, Spain and Sweden they adjusted monthly.

Thirdly, The contracting practices of energy retailers also differ from country to country, for example depending on dynamic pricing.

Finally, methodological differences in measuring inflation can also lead to cross-country differences in retail electricity price inflation.

These differences between countries are especially pronounced in the price of gas: for example, in Estonia, according to the IMF, out of a conditional 100% increase in the wholesale price of gas, about 80% reaches the consumer. This is a lot – in most European countries the figure is below 30%. In countries such as Sweden, Slovenia, Croatia and Spain, the coefficient does not exceed 10%, and in Hungary it is generally negative – that is, over the observed period, gas prices for consumers did not increase, but even fell.

However, a more correct indicator – the total cost of energy for consumers (gas, electricity, gasoline, etc.) – increased in 2022 in all European countries without exception, although the absolute cost of energy has a rather large spread.

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According to the latest IMF reportwhich is devoted to energy inflation, on average in Europe, retail prices in 2022 will increase:

  • for electricity – by 73%;
  • for gas — by 122%;
  • for gasoline – by 36%.

In total, due to this growth, the share of household expenditures on all energy carriers will reach 7% of all their expenditures.

However, the social impact of inflation is determined not so much by these averages as by their distribution, that is, primarily by how much the spending of the poorest Europeans increases. In almost all European countries, rising gas and electricity prices have hit the poorest segments of the population the hardest — this is due to the fact that it is in low-income households that utility bills and gasoline costs account for a larger share of all other expenses.

While the poor everywhere suffer more from energy inflation than the rich, the dispersion between inflation rates varies greatly from country to country. For example, in the UK and the Czech Republic, the share of energy expenditures between the poorest 10% and the richest 10% of residents differs significantly, while in Germany or Hungary, the difference is not so great.

!function(){“use strict”;window.addEventListener(“message”,(function(e){if(void 0!==e.data[“datawrapper-height”]){var t=document.querySelectorAll(“iframe”);for(var a in e.data[“datawrapper-height”])for(var r=0;rMost countries are trying to compensate part of their energy costs to citizens, but the list of “most socially oriented” states does not match the most affected

Realizing energy inflation as a social problem, governments of different countries are trying to compensate for the rise in prices for the poorest citizens with financial support. However, not everyone has the financial resources or political motivation to do so. Among the countries that spend the largest share of their income on combating the social consequences of the energy crisis are Greece, Bulgaria and Bosnia.

The Czech Republic, Portugal and the UK, on ​​the contrary, are not too concerned about such support so far.

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Data and infographics: Alexander Bogachev

Text: Alexander Ershov

Source: meduza.io

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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