Balades en expertise comptable :
Record-breaking surge in energy prices

Actu Anglais mai 2022

Record-breaking surge in energy prices... décrypté par Jean-François Allafort, professeur agrégé CE d’anglais, et Cécile Malet-Dagréou, chargée de cours en anglais, auteurs des Fiches DCG UE12 Anglais des affaires, collection « Expert Sup », Dunod

#UkraineWar #EnergyPrices #Gas #CleanEnergy

Record-breaking surge in energy prices

Russia is one of the largest oil and gas producers in the world. Any disruptions to their supply could have a major impact on prices. Analysts are predicting a rise to $120 per barrel, raising the cost of travel, shipping and heating our homes – and pushing inflation beyond 9%, much worse than the 6.6% spike back in 1989, when the Berlin Wall came down.

Prices of fossil fuels have been multiplied by more than 450% in less than one year. The world is facing an energy crisis, as countries struggle to recover from shortages post-pandemic.

There is a shortage of energy. Demand is higher than supply, resulting in increased prices and diminished availability.

For this, there are several reasons :
Firstly, the production of clean energy is not sufficient to meet demand. Winter has been colder than usual and wind and renewable sources - like wind and solar - have produced less than expected. Europe has gradually cut down on its dependency on fossil fuels, but the shift has not been widespread enough.

"This is about a surge in demand for energy as we come out of the restrictions imposed by the pandemic, combined with a reduced supply of gas on the global market. Then there are other factors exacerbating the problem, particularly in Europe. We have succeeded in getting coal off the grid, and that happens to coincide with a period recently where wind power has been lower because of the weather." Tim Gore, head of the Low Carbon and Circular Economy programme at the Institute for European Environmental Policy (IEEP) explained.

Secondly, rising gas prices have driven up the general price of electricity by over 230% in the last year. The connection between the two is based on the rules of the EU energy market, which has become increasingly integrated over the past decades.

The final price of electricity is often set by the price of coal or natural gas. If gas becomes more expensive, electricity bills inevitably go up.

The third reason is the Ukraine-Russia war and the financial sanctions imposed by the West will make things worse. Russia is the second-largest oil exporter after Saudi Arabia. As it can no longer export its production, this is creating even greater tensions on the market.

What can we expect ?

The surge in energy prices will undoubtedly make life more difficult for a great number of people in the UK and the European Union. And governments will be forced to come up with interim solutions, such as lowering the tax rates.

The EU’s exposure to volatile energy prices will remain a risk in the coming years. Europe will have to review its climate policy, toward more self-sufficiency and green sources of energy. "It’s a clear call for us to accelerate the shift to a more renewables-based energy system”, according to Dimitri Vergne, a sustainability policy officer at the European Consumer Organisation (BEUC).

In the meantime, there is no clear sign that the situation may get any better in the near future and the crisis is probably here to stay.

Key words and definition

References :

Dunod, 30 Fiches de révision pour réussir l’épreuve, DCG12, Fiche 14