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Electricity, gas, oil: How the energy crisis affects Germany's companies and consumers

2021-10-13T11:33:35.406Z

Suppliers are raising prices, industrial groups are threatening production stops: The high energy prices are causing problems for private households and companies. What politics want to do now.



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Electricity pylons in NRW: Winter will be expensive

Photo: Federico Gambarini / dpa

In the energy crisis that has been smoldering for weeks, the terrible news is now coming almost every hour:

  • On Tuesday, the

    utility E.on

    announced that it would not accept any new gas customers for the time being because of the high prices.

  • On the same day, the

    German

    steel group Salzgitter

    threatened production stops at its electricity-intensive location in Peine.

  • And the

    building materials company Heidelberg Cement is

    announcing short-term price increases, which is completely unusual for the industry.

Consumers are already feeling the crisis: According to the Federal Statistical Office, heating oil rose by 76.5 percent in September compared to the previous year.

Fuel cost 28.4 percent more.

The prices for natural gas (plus 5.7 percent) and electricity (plus 2.0 percent) also rose.

The expensive energy prices are a decisive factor in the fact that the inflation rate in Germany has recently risen above the mark of four percent.

In part, that's because prices were so low over the same period last year.

But the numbers are also harbingers of what consumers and businesses can expect in the face of skyrocketing wholesale prices.

The main reason for the rampant energy crisis is an imbalance between supply and demand. As a result of the economic recovery after the corona pandemic, production has picked up again worldwide - and with it, the demand for energy has increased. In some cases, the offer could not keep up with this. In addition, the higher costs for EU emission rights are driving up prices. Such papers will have to be bought by utilities and factories if they emit carbon dioxide into the atmosphere. In the gas market, there is also noticeably little supply from Russia. It is true that the state-owned company Gazprom complies with all contractual obligations. But he sends significantly less material to the West than he could. Critics suspect that the Kremlin intends to accelerate the start of its new Nord Stream 2 pipeline in this way.

This mixed situation has meanwhile led to record prices in all energy markets.

The long-term average of the gas price actually fluctuates between 15 and 20 euros per megawatt hour; it is currently 65 euros.

Since the beginning of the year, electricity on the exchange has become around 140 percent more expensive in Germany, and by as much as 425 percent in Spain.

In some cases, oil prices have reached their highest levels in three years.

What exactly do the record prices mean for companies and consumers?

And what measures could politics take?

An overview.

Business: The fuel of industry is becoming priceless

Germany's companies are particularly suffering from high gas prices. This is because the substance is required in countless industrial processes, for example as a heating medium for process heat or as a so-called reducing agent that removes oxygen from iron ore in steel production. A third of German natural gas consumption occurs in industry, especially in the chemical and metal industries, but also in the brick and tile industry, which uses gas primarily as a heat source. High prices make production more expensive in all of these areas.

Most industrial companies actually prepare for difficult times. They conclude so-called futures contracts on the market, which secure them future gas deliveries at certain prices. But this protection is not all-encompassing, and the first companies seem to be facing problems already. "We are very concerned about the rising energy costs," says the President of the Steel Federation, Hans Jürgen Kerkhoff.

Accordingly, the Salzgitter Group is already considering production cuts at its Peine site. The plant there is particularly energy-intensive because it melts steel scrap using so-called electric arc furnaces in order to then recycle it. The Swiss Steel Group is currently examining price surcharges for its production. The company owns a number of steelworks in Germany that use electricity to produce new steels from scrap metal. Around 4,000 employees work in the four locations of Deutsche Edelstahlwerke North Rhine-Westphalia. "Even the stop of production or the relocation of shifts are conceivable at short notice," said Swiss Steel boss Frank Koch on Tuesday the SPIEGEL.

The situation does not look much better abroad. In the UK, energy prices have risen a whopping 250 percent since the start of the year. Many energy suppliers had to stop trading. Economy Minister Kwasi Kwarteng had therefore called a crisis meeting at the weekend. According to the Financial Times, the British economy is calling for an aid package worth billions of pounds.

In China, German companies are also suffering from an energy crisis.

The prices for coal there have tripled in some cases since the beginning of the year, which power plants cannot pay for.

Regional governments in many parts of the country are repeatedly ordering the closure of businesses - sometimes from one day to the next.

The problems are likely to worsen with the upcoming heating season, said the chairman of the EU Chamber of Commerce in China, Jörg Wuttke.

"We're in a marathon, not a sprint." He believes the rationing will last until at least March.

Consumers: Winter is going to be expensive

German consumers will feel the consequences of the energy price crisis even more directly than companies.

According to the comparison portal Verivox, electricity costs in Germany rose by 9.3 percent in October compared to the previous year.

This means that electricity is more expensive in Germany than ever before.

Consumers would have to pay 28 percent more for heating with gas, and 87 percent more for oil than a year ago.

The Stadtwerke Memmingen in the Free State of Bavaria currently hold the sad record for price increases, according to the "Bild" newspaper.

They want to raise their gas tariff by a whopping 68 percent on December 1st.

For a family of four, this means additional costs of 786 euros per year.

So far, a total of 61 gas suppliers have raised their prices for this winter or announced tariff increases.

The increases are around ten percent on average.

Experts anticipate that many more utilities will soon raise prices.

Rising costs are also to be expected in the electricity sector.

Some companies are no longer reacting with just price increases.

The energy company E.on, for example, stopped new business with private customers for the time being because of the explosion in gas prices.

"Unfortunately we are currently unable to offer you any natural gas products," the company announced on its website.

The company Deutsche Energiepool went even further in September and even terminated the gas supply contracts for some existing customers.

Warnings are already circulating that poorer people are likely to freeze in winter because they can no longer pay their heating bills.

In other EU countries, some of which are significantly poorer, the situation looks even grimmer.

Ways out: will the heating allowance come?

The possible ways out of the energy crisis seem to be limited, at least in the short term.

Representatives of the Federal Government are currently proposing two main measures: subsidies for needy citizens towards the heating bill - and a rapid reduction in the EEG surcharge.

While heating subsidies can be initiated quite easily and unbureaucratically, the rapid reduction in the EEG surcharge seems less realistic.

The amount of the levy for the coming year will be announced this Friday. According to information from parliamentary circles, the Bundestag would have needed a resolution by 30 September at the latest to transfer a subsidy of up to 15 billion euros from the federal budget to the EEG account in the coming year. But that did not happen. How the responsible Federal Minister of Economics Peter Altmaier (CDU) wants to lower the surcharge is completely open.

Altmaier had said several times in the past few weeks that he wanted to approach the SPD, Greens and FDP to discuss short-term relief for consumers. But according to information from the parliamentary groups, he did not do that. In the exploratory talks for a traffic light coalition, however, the topic had already been discussed independently, and details could be discussed in the coming week.

Until then, the greatest hope for consumers is likely to be that the controversial Nord Stream 2 pipeline will soon be inaugurated - and at least that this will defuse the European gas crisis by itself. The Federal Association of Consumer Centers (VZBV) advises that customers should also consider a possible change in their electricity and gas provider now. If their previous provider announces a price increase, consumers can terminate their contract within 14 days.

In other EU countries, which were hit even harder by the energy price crisis, they are already further ahead than in Germany.

Several Member States have already taken measures to protect households from high electricity and heating bills.

For example, France wants to pay poor households 100 euros.

Italy wants to invest three billion euros to relieve citizens of their electricity and gas bills through tax cuts.

Spain is also planning tax breaks.

Great Britain wants to support energy suppliers with loans.

The EU Commission now wants to bundle these and many other proposals in a toolbox.

It has also promised to accept short-term aid measures from Member States for the poor in justified emergencies.

Source: spiegel

All business articles on 2021-10-13

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