ZEW Energy Market Barometer – Experts Expect Further Long-Term Increases in Electricity, Gas and Oil Prices

Energy experts expect electricity, natural gas and crude oil to become significantly more expensive in the coming five years. Coal prices, on the other hand, will increase less over this period of time. On a six-month horizon, the expectations regarding the increase or stagnation of prices for the mentioned energy sources are mostly balanced. Reductions in the prices for energy sources are considered unlikely. These are the findings of the current ZEW Energy Market Barometer by the Centre for European Economic Research (ZEW), Mannheim. The biannual survey is conducted among approximately 200 experts from energy supply companies, energy-trading companies, and energy service providers, who are asked to give their expectations concerning short and medium-term developments on the national and international energy markets.

80 per cent of the surveyed experts expect growing electricity prices for industrial companies in the coming five years. Approximately 15 per cent assume stagnating and five per cent falling prices in this period of time. The short-term expectations are less pessimistic, but do not promise an easing electricity price situation either. For the coming six months, 42 per cent of the experts expect rising, 53 per cent stagnating and about five per cent decreasing prices. The experts' rather pessimistic assessment of the development of electricity prices, particularly in the long term, was voiced in spite of the announcement made by the president of the Federal Network Agency, Matthias Kurth, declaring the introduction of a more cost-effective grid operation by 2008. This way, authorities intend to reduce the costs of operating electricity networks by two per cent per year. After all, network charges make up about a third of the final price.

The expectation of rising electricity prices in Germany is probably linked to the expectations regarding the development of gas prices. The latter is an important determinant of the electricity price and depends on the developments in international markets. On a five-year horizon, 76 percent of the participants expect gas prices to increase whereas 16 per cent estimate stagnating and seven per cent falling prices. For the coming six months, the forecasted price increases for gas are particularly high compared to the other energy sources. While 59 per cent of the energy experts expect growing prices, about 39 per cent assume stagnating and only two per cent decreasing prices.

The participants in the ZEW Energy Market Barometer similarly assessed the development of the oil price. In the long run, more than 73 per cent estimate an increasing, 17 per cent a rather stagnating and ten per cent a falling price for oil. On a six-month horizon, a slim majority of 51 per cent expects the oil price to grow whereas 45 per cent assume that it will stagnate and almost five per cent expect it to decline.

 The short-term and long-term expectations in terms of coal price increases are the least pronounced. Almost 60 per cent of the interviewed experts assume rising, 34 per cent stagnating and only six per cent decreasing prices in the next five years. In the short term, just a third of 34 per cent estimates a price increase. Almost two thirds (65 per cent) expect stagnating and two per cent falling prices.

Contact

Dr. Ulf Moslener, E-mail moslener@zew.de  

Dr. Tim Mennel, Phone +49(0)621/1235-201, E-mail mennel@zew.de