Germany Considers Price Caps As Energy Crisis Worsens

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By Michael Kern

Germany looks to cap the prices of electricity and natural gas to help households and businesses reel from the soaring energy prices, The Wall Street Journal reported on Monday, quoting German government officials.

According to the Journal’s sources, the plan for price caps in Europe’s biggest economy could become official in the coming weeks if the EU doesn’t agree on a price cap for the entire bloc.

Elsewhere in Europe, in the UK, for example, there is a price cap on energy bills that energy providers can charge to customers. The new UK has just announced that it would cap the annual energy bills for households at $2,700 (£2,500) for two years.

Unlike the UK cap on prices, and a similar measure introduced in France, the cap in Germany would rather impose a levy on electricity-generating firms that charge more than a certain amount, yet to be determined, the Journal’s sources say. The money collected from the levy on producers would be later distributed to the operators providing energy to the end users, which would allow for lower power prices for end users.

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Many energy-intensive industries and companies in Germany are already feeling the pinch from the soaring natural gas and electricity prices. Some have curtailed production or stopped entire production lines, many others plan to do so.

Signs are mounting that the German economy is slipping into recession, which will deepen as we head into the winter months amid the ongoing natural gas and energy crisis, Bundesbank, the central bank of Germany, said in its monthly report last week.

Also last week, the German government, energy giant Uniper, and Uniper’s majority shareholder, Finland-based firm Fortum, signed a deal under which Germany would nationalize its largest gas importer, in a move aimed at preventing a collapse of the German energy and gas suppliers.

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By Michael Kern for Oilprice.com

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