Report
Should the government administer energy prices?
The surge in energy prices may lead governments to administer energy prices, and to cover any difference between the market price of energy and its administered price. What to make of this practice, which is being used today in France for example? An obvious advantage is that it prevents strong variability in energy prices, which is destabilising, and unbearable purchasing power losses for low-income households. But then we have to distinguish between a transitory and a permanent rise in energy prices. In the event of a transitory rise, the above benefits prevail. But in the event of a permanent rise, an energy price freeze: Creates a very significant budgetary burden, which must be financed; Removes the price signal of high energy prices, which encourages energy savings; Leads to a sharp jump in the price if the freeze is finally abolished. It is possible that the rise in energy prices we have seen will now be come permanent.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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