Rising energy prices: IW analysis reveals drastic scenarios for consumers
Created: 08/11/2022, 07:17
By: Sophia Lother
Many also feel the rising energy prices at the supermarket checkout.
(symbol photo) © Jens Kalaene/dpa
What do rising energy prices mean for consumers and companies in Germany?
An analysis provides answers.
Cologne – In view of the rising energy prices, food prices are currently climbing steadily.
Consumers are faced with ever increasing costs.
This was also the result of an analysis by the Institute of German Economics (IW) in Cologne.
The authors run through various scenarios for rising energy prices - starting from a high starting point.
The gas price alone has already quintupled on average between 2020 and 2021.
However, the institute emphasizes that these are not forecasts, but rather possible developments.
Depending on the respective scenario, there are different effects for consumers.
Prices for electricity and gas explode: IW analysis names specific scenarios for consumers
In the first scenario, the scientists assume that the price of natural gas will increase by 50 percent from the second to the third quarter of the current year, with normalization or calming down again only in the course of the coming year.
At the end of 2023, the gas price would then still be twice as high as the average for 2021. In this model calculation, the oil price rose slightly by 10 percent in the third quarter of the current year and fell back in the course of 2023, but would then still be 45 percent higher Annual average 2021.
These are realistic assumptions, says co-author Thomas Obst.
There has already been an approximately 50 percent increase in the price of gas from February to March.
The experts assumed that the price of oil would rise less because it is transported by ship instead of by pipeline and can therefore be replaced more easily.
Rising energy prices: what impact this is having on consumers
The researchers compared the additional economic costs these developments would entail compared to a baseline scenario.
In the baseline scenario, the gas price is assumed to fall by around a third and the oil price by around a fifth by the end of 2023 - in each case compared to the level of the second quarter of 2022. "The situation is tense, but solvable," says Obst, describing this model calculation.
Under these assumptions, the missing gas could be partially replaced, and the German storage facilities could be largely filled.
At the same time, industry and consumers would save gas.
The consequences for the German economy would be clearly noticeable in the first scenario compared to the baseline scenario.
According to IW calculations, the inflation rate would rise by 0.9 percentage points in the current year and by 1.3 percentage points in the coming year.
Economic output would also suffer: the gross domestic product (GDP) would be 0.2 percent lower this year and 1.3 percent lower in the coming year – the researchers excluded inflation from these calculations.
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Energy prices explode: Scenario paints a bleak picture for consumers
Since people would have less money at their disposal, they would also buy significantly less: private consumption would be 1.1 percent below the baseline scenario.
The companies, in turn, would have less money left for investments.
These will fall by 0.4 percent in 2022 and by 3.1 percent in 2023.
In the second scenario, the experts are assuming that the gas supply will be far more uncertain and that deliveries will continue to be throttled.
Specifically, they assume that the price of natural gas will double and remain at this level in 2023.
The assumed doubling of the gas price was recently shown on the futures exchanges, says Obst: The prices for transactions with future deliveries, so-called futures, would have roughly doubled in mid-June.
In addition, the price of oil would rise by 30 percent in this scenario.
At the end of 2023, the gas price would be four times the 2021 annual average.
Oil prices would be about 72 percent above 2021 levels.
Electricity and gas prices: This is how consumers are burdened by the rising costs
Under these assumptions, the effects would be even more pronounced.
The experts then assume that the inflation rate will be 1 percentage point higher in the current year and 4 percentage points higher in the coming year – again compared to the baseline scenario.
According to the calculations, gross domestic product would be 2 percent lower in 2023.
Overall, the loss of economic output would be around 70 billion euros.
Investments would fall by 0.4 and 4.2 percent this year and next, respectively.
The unemployment rate could therefore increase by a little more than half a percentage point in 2023, and unemployment could rise by over 300,000 people.
Normalization would not return until 2024. "Normalization does not mean a return to the pre-war level," emphasized Obst.
He expects a complete restructuring of the energy infrastructure, for example through the construction of terminals for importing liquefied natural gas (LNG).
"That costs money and time, especially since liquid gas is more expensive than natural gas." Normalization, i.e. a stable state again, means in this case: "The uncertainty would subside again, we would know again where we get our energy from and assume that that stays that way.”
The two scenarios do not take into account possible production losses in the event of a complete gas supply stop, because the effects of this would be too complex from the point of view of IW and therefore difficult to represent in models.
"Regardless of this, consumers and producers must be prepared for persistently high prices," write the authors.
"The relief packages that have been decided so far can only partially compensate for the additional burdens to be expected".
(slo/dpa)
