t-online: Relief? Only high gas prices can help us now

6 mins read

Germans are facing high gas bills. Why the state should not pay them.

No matter what Putin does, one thing is certain: winter will be expensive.

Even if gas from Russia starts flowing through the Nord Stream 1 pipeline again next Thursday, we will hardly be able to build up enough reserves to get through the heating season as relaxed as in the past. And if Russia’s state-owned Gazprom turns off the tap completely, things will get really uncomfortable.

As a result, energy prices are likely to rise again, or at least remain at the current high level. From 2023, gas customers will have to be prepared for a threefold increase in prices, according to Klaus Müller, President of the German Federal Network Agency. At least. For consumers who currently pay 1,500 euros a year for gas, bills of 4,500 euros and more per year are “absolutely realistic.”

We all need to save energy now

In view of such sums, calls are being heard for further government relief for citizens. A gas price cap is being discussed, a moratorium on energy freezes is being called for, and of course there would have to be additional financial benefits for everyone, money from the state, so that the high prices for energy do not drive anyone to ruin.

Rangeln um mögliche Entlastungen: Wirtschaftsminister Habeck (r.) fordert zusätzlich Hilfen, Finanzminister Lindner (l.) ist skeptisch.
The two sides argue about possible relief measures: Economics Minister Habeck (r.) calls for additional aid, Finance Minister Lindner (l.) is skeptical. (Source: imago-images-pictures)

Rightly so, you say? After all, what can I do about the fact that Russia attacked Ukraine? And anyway, isn’t it only logical that the government should remedy the situation now, after having maneuvered us into dependence on Putin’s gas in the first place?

At first glance, all this may be true. At second and third glance, however, it becomes clear that it is not quite that simple. The current gas crisis cannot be solved with more money alone. It can only be solved by saving energy and cutting back on everyday consumption – from small single households to large chemical factories.

Higher prices create incentives to save

Because what is currently making gas so expensive are purely market-based mechanisms. If the Russian state-owned company Gazprom cuts gas supplies, as it did recently, or if Putin even orders a gas freeze, this will reduce the supply of gas in Germany. If, at the same time, demand for gas remains high, prices rise because millions of customers compete for a scarce commodity.

Conversely, this means that just because the government takes on debt to provide more financial leeway for its citizens (by whatever means), there will not suddenly be more gas available – on the contrary. At worst, relief across the board could even mean that demand hardly falls at all, while gas supply continues to decline – so that prices on the market would rise even more sharply than previously assumed.

Looking ahead to the coming weeks and months, this means that it’s a good thing that energy companies may soon be allowed to pass on sharply rising costs to their customers, even if they actually still have a long-term, favorable supply contract.

Targeted assistance needed for low-income earners

Only then will what economists call a “price signal” come into effect in the short term, in the form of a letter from the energy provider: “Attention, gas is becoming more expensive, from now on you will pay three times as much as before. So you’d better limit your consumption and turn down the heating to protect your wallet.”

If the state were to take over this protection, for example by capping the gas price and compensating for the difference to the market price, this effect would fizzle out. In that case, nationwide consumption would probably not fall enough.

Certainly, the state must provide targeted assistance to individual social groups that simply cannot afford the high prices. Hartz IV recipients, for example, by raising rates in the short term, low-income earners, pensioners and students with lump-sum payments based on income, and ailing companies with short-time working allowances.

We are in an economic war

But there must be no compensation for all, the much-cited “money watering can” even for those people and companies who can afford the higher prices because of their incomes, assets and profit margins. Even if many people in the country do not want to admit it and Chancellor Olaf Scholz (SPD) is doing everything he can to avoid this impression:

Germany has long been in an economic war with Russia. We are all involved in it. And we can make a contribution to winning it – by saving energy as quickly as possible.

translated from t-online.de. Click for the original article

Salih Demir

Salih Demir lives in Germany. He is interested in politics and economy. Germany editor of -ancient idea- fikrikadim.com