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European governments scramble to manage fuel price spikes amid energy crunch

January 17, 2022

By Paul Homewood

 

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Europe is gripped by one of the worst energy crunches in history, forcing politicians to step in as soaring prices threaten to leave millions of households unable to pay their bills.
But with market forces signalling that the crisis will last way beyond the winter, the dilemma facing leaders is that their stopgap measures are unlikely to be enough.


The cost of electricity and gas across the continent already looks like one of the biggest challenges facing nations as they navigate their way out of the pandemic.
Ministers in the five biggest European economies – Germany, the UK, France, Italy and Spain – have so far come up with a patchwork of grants and time-limited tax cuts to help consumers heat and power their homes.
Indeed, the common thread seems to be to hope the problem goes away while also leaning more on companies.
Electricite de France shares plummeted by a record on January 14 as the French government confirmed plans to force the company to sell more power at a hefty discount.
Gas more than tripled last year and energy companies, analysts and traders all say that high prices are set to persist, already a key driver of now rampant inflation.
Contracts have eased from their peak, yet the weather may still get colder. There is also mounting tension with Russia over a possible invasion of Ukraine, which could disrupt vital supplies.
“The scale of the crisis makes government measures insufficient to cover all impacts across the economy,” said Simone Tagliapietra, a fellow at European economic think tank Bruegel. 
“The longer this situation persists, the more governments will be forced to target their support towards specific segments of society – a difficult triage, both economically and politically.”
Bank of America estimates European households will pay an average of 54pc more for energy this year than in 2020, with the biggest increases in the UK and Italy, where average yearly bills are set to jump by more than €875.
Assistance deployed so far also reflects the different political cultures: Bank of America reckons that plans announced so far include an annualised €337 per household in Italy, more in France and yet zero in the UK.
The trouble is that it all comes as governments need to tighten their belts after almost two years of state largess to protect businesses and workers through Covid-19.
They also have to balance the impact of state intervention on the energy companies they are relying on to deliver on ambitious national climate goals to phase out carbon emissions.
Then there are the more acute political implications coming to a head in April.
French President Emmanuel Macron faces an election, while the squeeze on the cost of living in the UK is set to tighten with an increase in the energy price cap, adding to the turmoil engulfing Prime Minister Boris Johnson.
The UK government is examining ways to help domestic consumers by expanding grants and discounts to pensioners and low-income households, and industry proposals for loans to delay some of the jump in costs coming in April.
Mr Johnson has said a cut in value-added tax on bills is too blunt an instrument.

https://www.bloomberg.com/news/articles/2022-01-16/europe-s-energy-crisis-how-governments-are-trying-to-curb-soaring-bills

19 Comments
  1. Stonyground permalink
    January 17, 2022 7:19 pm

    Entirely predictable, entirely preventable problem caused entirely by ignorant and incompetent politicians.

    • Julian Flood permalink
      January 17, 2022 7:51 pm

      Name names. Milliband. Worthington. Cameron. Johnson’s, Boris an Carrie. Actually, thinking about it, it’d be quicker to name a politician who hasn’t been fully on board with the whole climate virtue-signalling nonsense.

      And where’s the MSM in this? Doing what its billionaire owners tells it to do, telling lies for the powerful.

      Lies, believing nonsense, suspending commonsense, all that has consequences. The laws of physics cannot be avoided and trying to run a modern society on airy-fairy dreams will always lead to catastrophe.

      Watch out, Eloi! Here come the Morlocks.

      JF

      • Harry Passfield permalink
        January 17, 2022 8:40 pm

        Can I add to the list, Julian? How about Huhne, Davey, Lucas, and all the 600-odd MPs who voted in the CCA

    • David Wojick permalink
      January 17, 2022 11:53 pm

      Yes but now it may be an opportunity to start to reverse climate madness. I discuss this here:
      https://www.cfact.org/2022/01/07/energy-anguish-hits-britain/

  2. MrGrimNasty permalink
    January 17, 2022 7:23 pm

    BBC fails to understand the costs to consumers yet again.

    https://www.bbc.co.uk/news/uk-scotland-59980279
    https://www.bbc.co.uk/news/uk-scotland-scotland-business-60002110

  3. Ron Arnett permalink
    January 17, 2022 7:43 pm

    My heating bill went up one hundred percent this month here in Lithuania.It was already pretty expensive. Because I have just moved in and the heating bill is so much more than was indicated when considering renting, the landlady offered to take twenty Euros off the rent for the month. I told her it wasn’t her fault but government policy so not to worry about it. Of course, if she had said she was going to take a hundred euros off, my answer would probably have been different.

    My heating bill is now two thirds of my rent. I can afford it but I strongly doubt many of my neighbors can be fatalistic about it. Oh, of course, that was my consumer spending money that is now removed and gone down an energy hole. Along with millions of others.

  4. Gamecock permalink
    January 17, 2022 8:04 pm

    ‘Electricite de France shares plummeted by a record on January 14 as the French government confirmed plans to force the company to sell more power at a hefty discount.’

    Richard Nixon tried this in 1973. It was a disaster.

    The market will adjust to balance volume and margins. Government stepping in and demanding below market pricing will result in . . . three guesses . . . no supply.

    In 1973, I would have rather had gasoline at $5 a gallon than no gas at $1 a gallon.

    Thanks, Nixon.

    The test for EU leaders is are they smart enough not to force prices below replacement cost? The French government appears not to be. The French government is turning a problem into a disaster.

    • Phoenix44 permalink
      January 18, 2022 11:33 am

      Forcing people to sell below cost results in Venezuela and pretty rapidly.

    • Russ Wood permalink
      January 20, 2022 11:12 am

      My wife’s late uncle (a retail pharmacist) had a saying: “We can also sell at that low price when we don’t have any!”

  5. Old Grumpy permalink
    January 17, 2022 8:18 pm

    We need more trees – money trees, that is

    • January 17, 2022 8:52 pm

      More trees, yes. I have a wood burner.

  6. January 17, 2022 8:49 pm

    Let’s tell it as it is…

    IT’S ENTIRELY THEIR FAULT!

    They can’t blame anyone else.

  7. Robert Christopher permalink
    January 17, 2022 8:52 pm

    I sent an email containing these two paragraphs on December 2nd, 2011, to a member of the local sustainability group:

    “Anyway, the political movement behind “Global Warming” appears to ignore the financial and industrial needs of this country and its people: rising fuel bills; spending money on windmills that cannot produce any power on the coldest days of the year (when there is no wind) and supporting climate scientists that have aided a British University to break the Law. [That was the UEA CRU not revealing information in time]

    People are now realising that the CO2 scare has no foundation, certainly not for several decades. In the last decade, CO2 levels have continued to creep up, but the earth has refused to get warmer.“

    The first paragraph has turned out to be true.

    It’s unfortunate that questioning the CO2 scare has taken so long to gather momentum, but at least it looks as though, after ten years of waiting, climate policy changes are being discussed in the media.

  8. January 18, 2022 9:18 am

    ambitious national climate goals to phase out carbon emissions

    Absurd, foolish and ruinous goals which won’t get anywhere near to phasing out ‘carbon’ emissions anyway. UK & EU governments are now looking at paying energy subsidies to the same people they’ve forced into paying them energy subsidies.

    Ignoring commonsense and issuing climate decrees is for losers.

  9. Phoenix44 permalink
    January 18, 2022 11:37 am

    To give every household £250 would cost £7.5 billion. Do we really believe the government couldn’t cut £7.5 billion from other spending to fund that? That’s less than 1% of government spending.

  10. Vernon E permalink
    January 18, 2022 11:51 am

    But it wouldn’t address the problem, Phoenix, would it? Solutions to this crisis lie entirely in the technical/physical realm. Alms to the poor are not going to change anything.

    • January 18, 2022 3:47 pm

      Isn’t this a simple supply and demand problem. As govts continue to close off both volume and low-cost supply, price is inevitably going to rise. Add to that subsidies levied onto that cost, and it rises even higher. A free market would regulate supply itself, so govts need to butt out and let the market restore the balance, and lower prices. The Greenies would complain that this would encourage ‘energy excess’, but haven’t yet understood that civilization needs energy to survive and thrive, and artificially capping and rationalizing it only causes suffering. Efficiency comes through technical innovation, not govt control.

  11. Realist permalink
    January 18, 2022 12:04 pm

    If they really wanted to help ordinary people, European politicians could drastically reduce, ideally scrap all the taxes they keep inventing and keep increasing on all forms of energy, particularly petrol and diesel. It is particularly bad for the latter two where some seventy percent of the actual price at the pump is tax!

    • January 18, 2022 3:50 pm

      Not forgetting that oil co’s also get taxed corporately, and for the rest of us, the tax on fuel is a bottom-line cost, not a tax on productivity/success.

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