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We Are All Facing The Same Storm, But Not All Are In The Same Boat. A Distributional Picture Of The Purchasing Power Effects Of The 2021‐22 Energy Price Shock And Compensating Measures

Author

Listed:
  • Bart Capéau
  • Duygu Güner
  • Nabil Sheikh Hassan
  • Jonas Vanderkelen
  • Toon Vanheukelom
  • Stijn Van Houtven
  • André Decoster

Abstract

Belgian households are hit hard by the ongoing energy crisis. This was already the case before the Russian invasion of Ukraine, when energy prices increased because of a supply shock, exacerbated by the uplift in economic growth and accompanying higher demand for energy products. Year‐on‐year inflation stood at 8.0% in February 2022, the highest level in Belgium since August 1983 (Statbel 2022). The increase of the Consumer Price Index is driven by a price increase in electricity (+72.8%) and gas (+133.7%). However, not all households are faced with such a large price increase. Households with a fixed contract1 are protected – at least temporarily – against the adverse price shocks. New energy contracts are generally flexible. The longer the inflated prices persist, the more fixed contracts will end and forcibly be renewed with higher, flexible rates. The duration of this crisis is therefore of importance for the impact of the price shock and the time window covered by the analysis will thus affect itsassessment. The price shock is also asymmetric because of differences in household consumption patterns. While households in the bottom income decile spend 7.3% of their disposable income on electricity and gas, households in the top decile only spend 2.3%, and large differences within thedeciles exist as well.

Suggested Citation

  • Bart Capéau & Duygu Güner & Nabil Sheikh Hassan & Jonas Vanderkelen & Toon Vanheukelom & Stijn Van Houtven & André Decoster, 2022. "We Are All Facing The Same Storm, But Not All Are In The Same Boat. A Distributional Picture Of The Purchasing Power Effects Of The 2021‐22 Energy Price Shock And Compensating Measures," Working Papers ECARES 2022-05, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/340755
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    References listed on IDEAS

    as
    1. Hindriks, Jean & Serse, Valerio, 2022. "The incidence of VAT reforms in electricity markets: Evidence from Belgium," International Journal of Industrial Organization, Elsevier, vol. 80(C).
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