German Businesses Rocked by New Energy Prices – Survey

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About 40% of German companies have already felt the consequences of the rapid rise in energy prices over the past several weeks, a survey by the Ifo Institute for Economic Research in Munich published on Monday has found.

The survey covered 1,100 German enterprises, 950 of which were family owned. As many companies surveyed have long-term supply contracts, not all respondents said they felt hefty price increases so far. However, a quarter of the firms surveyed said they expect their energy costs to spike in the second half of this year, while another quarter believe it will happen in 2023. The survey also showed that almost 90% of businesses are likely to raise prices to counter the skyrocketing energy costs, and three-quarters of the companies intend to invest more in energy efficiency.

Some 11% of the firms are considering the possibility of completely abandoning energy-intensive business areas, and 14% are studying the possibility of cutting their staff. Still, only a small percentage of the surveyed companies want to move their offices abroad.

“We need a policy that corrects this distortion of competition and stops skyrocketing energy prices,” Professor Rainer Kirchdörfer, one of the experts behind the survey, said, referring to the fact that Germany had significantly lost its competitiveness in energy policy even before the current energy crisis, brought about by the events in Ukraine.

Energy prices soared last month, after Russia launched a military operation in Ukraine, which triggered a flood of Western economic sanctions against Moscow, though the measures stopped just short of an embargo on Russian crude oil and natural gas. Russia retaliated by introducing a new ruble-based payment mechanism for its natural gas, hinting at the possibility that other energy exports might follow.

According to the German news agency DPA, citing data from the Verivox online platform, the increase in energy prices will inevitably lead to a significant increase in electricity prices for private consumers in Germany this year. Electricity suppliers in the country, responsible for roughly 13 million households, have already announced an increase in tariffs in April, May and June by an average 19.5%. Growth in gas prices is expected to be even greater, at about 42.3%.

According to Verivox, if a household paid an average of €1,171 ($1,258) for electricity per year prior to the Ukraine crisis, with the current costs it will have to pay some €1,737 ($1,867). The situation is even worse with natural gas: a household that paid €1,184 ($1,272) for gas annually in April last year would pay €2,787 ($2,995) at current prices, which equals to an increase of 135%.

The EU pledged to end its dependence on Russian energy earlier this month, despite importing roughly 40% of its gas and 30% of its oil from the country. However, experts and politicians within the bloc have warned that banning Russian energy imports could only lead to further price spikes, as it would be impossible to find an alternative quickly enough.

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