By Paul Homewood
High energy prices are here to stay:
Europeans will pay an additional 350 billion euros ($395 billion) in energy bills next year as global demand for fuel and power threatens to keep prices elevated, according to Greece’s energy minister.
Kostas Skrekas said a new mechanism to help shield the most vulnerable citizens and middle-sized businesses from price increases should be created at the European Union level. It came as officials from Hungary and Spain voiced concern about recent volatility in carbon-emission markets at a meeting of environment ministers in Brussels.
“In the face of this extraordinary situation, we cannot remain uninvolved,” Skrekas said. Greece had estimated earlier this year that Europeans would face an increase of 100 billion euros this winter alone.
Europe’s energy crunch is straining national budgets and has become one of the EU’s biggest political challenges, fuelling inflation just as governments contend with the spread of the omicron virus variant. Member states have come forward with a number of proposals, from a redesign of how the electricity market works to caps on the bloc’s carbon trading market.
Across the continent prices per megawatt hour (MWh) now exceed €300 (£256) in most countries. With the exception of Poland and Scandinavia all countries in Europe have broken the €300 MWh barrier with France and and Switzerland nearly at €400 (£341.60). Head of Analytics at research firm Enappsys Andre Bosschaart said he’d “never seen this kind of volatility and high prices” adding that predictions for tomorrow’s prices suggested France and Germany would break past €400 (£341.60) MWh. Head of Oil and Gas Research at Investec Nathan Piper described the prices as “phenomenally high”, adding that gas prices were now 10 times higher than the US in Europe.
$395 billion is an incredible amount, presumably on top of this year’s price rise. It equates to $890 per capita.
It is also clear that prices wont come down anytime soon, if ever. Indeed, this is exactly the scenario that the EU has been planning – to push up energy prices so much that renewables are competitive.
The only way to get prices back down is to increase production of oil, gas and coal. Under normal circumstances, rising market prices would incentivise this. However it is EU policy which is holding this back.