Rising energy prices fuel inflation fears

With the price of crude oil hitting $100 per barrel, European citizens must prepare for large increases in gas and electricity bills in the coming weeks, with major companies in the UK and France already announcing plans to raise prices by as much as 27%.
Trade unions and consumer bodies in both France and the UK have criticised the price hikes as “socially indefensible” and “economically unjustified”.

However, higher energy prices are increasingly likely to become a reality in the coming years because, although the oil price has slipped back slightly to $98, many experts predict it will rise still further, impacting on living, transport and food prices.

According to a poll cited by the Financial Times on 7 January, rising electricity prices are topping the list of concerns for Germans in 2008. Businesses are now paying 65% more for their power than when liberalisation started ten years ago, while consumers have seen their electricity bill soar by 50% since 2000, the paper notes, saying that “liberalisation fatigue is already tangible in the German government”.

The rise in energy prices is starting to heighten concerns about inflation. In the euro area, the annual inflation rate in December 2007 stood at 3.1%, well above the 2% target of the European Central Bank, according to Eurostat estimates published on 4 January.

EurActiv