Skyrocketing Energy Bills Raise Risks of Windfall Taxes in Europe
The higher energy bills in Europe rise, the higher the chances of a windfall tax on energy companies and utilities, as governments will be forced to ease the growing strain on household finances, Citigroup says.
Europe as a whole could see the utility bill rise by more than 3% of gross domestic product (GDP) through 2024, Citigroup Global Markets analysts Piotr Dzieciolowski, Jenny Ping and Antonella Bianchessi wrote on Monday. in a note published by Bloomberg.
Gas and electricity bills in Europe could rise to 4.5% of household disposable income in 2023, from 3.5% in 2021. Utility bills could rise further to 4.8% of household disposable income. households in 2024, according to Citi analysts.
In Eastern European countries, where commodity prices account for a larger share of bills, disposable income is likely to decline the most, according to the investment bank.
According to a Citi survey, a quarter of respondents across Europe aged 18-29 say they would not be able to pay their bills on time if bills increased by a tenth.
Bills have been rising in Europe since autumn 2021, when the shortage of natural gas caused gas and electricity prices to rise. The Russian invasion of Ukraine further weighed on household incomes as utility bills soared with soaring commodity prices.
Spain and Portugal have set a cap on the price of gas used to generate electricity, after the EU allowed them to do so, recognizing their exceptional energy needs.
Outside the EU, in the UK, soaring energy prices are hitting households and energy suppliers in a market that has realized that Britain’s cost of living crisis will not resolve itself not soon and that it will get even worse next winter.
The UK has what is known as an energy price cap, which protects households from excessively high bills by capping the price that suppliers can pass on to them, but additionally burdens suppliers of energy.
But as the price cap was raised significantly in April – due to high energy prices in the six months before the increase decision by energy market regulator Ofgem in February – households have increasingly struggling to pay their energy bills.
The cost of living crisis “is going to get really awful” in October, Keith Anderson, chief executive of one of the biggest suppliers, ScottishPower, told a parliamentary committee last month.
By Charles Kennedy for Oilprice.com
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