You are currently viewing Why are prices soaring?  How do we calculate?  Understand everything about the increase in gas and electricity in 15 questions

Why are prices soaring? How do we calculate? Understand everything about the increase in gas and electricity in 15 questions

  • Post category:Economy News
  • Reading time:2 mins read

The law of the market: the “natural” rise

If we wanted to simplify, there is a very simple answer to “Why are energy prices rising?”, it is “because demand is increasing and supply is decreasing”.

The first price increase, in 2021, is indeed linked to the economic recovery when we had witnessed a major recession at the height of the Covid-19 pandemic. And who says economic recovery says higher energy consumption, and therefore demand.

Alongside this, the supply in Europe has decreased for several reasons: the shutdown of part of the French nuclear fleet, and of course, the problems linked to the supply of Russian gas, around Nordstream in a first time, then because of the war in Ukraine and the sanctions. However, electricity and gas are not goods like the others, they cannot be bought anywhere in the world: you must either be connected, or in the case of gas, carry out major manipulations which require both equipment and have a significant cost.

This is why the States, encouraged by the European Commission, are taking “energy sobriety” measures: in a market economy, lowering this demand will automatically lead to lower prices.