November 27, 2021

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Entrepreneur transfers higher gas price to customer

Entrepreneur transfers higher gas price to customer

Due to the impending shortage, the price of gas has risen significantly in a short period of time. The average price of already supplied gas has risen 15 percent this year. According to economists at ABN Amro, companies that consume a lot of energy and have poor profit margins are in trouble. For example, companies in horticulture, heavy industry and food industries.

eliminate profit

But there are more energy-intensive industries that are in trouble because they see energy costs rising sharply. Think chemical companies, paper and cardboard companies, and the building materials industry. All of them are exposed to rising energy costs, which can wipe out their profit margins.

Although the exact numbers are not known, because the energy contract entered into is competitively sensitive business information, these companies will generally use variable contracts. As a result, they feel pain in a relatively short period of time. According to the bank, large consumers who have set their prices often do so for a few months, so that they will still have to deal with higher costs in 2022.

As consumers, we will eventually notice this in the form of more expensive and possibly also scarce products on the shelves.

Ban red numbers

“Entrepreneurs selling building materials are likely to pass on higher energy costs to avoid the red numbers,” Madeleine Puigs, an economist at ABN Amro, told RTL Z. These are products that use a lot of gas, like steel, cement and concrete, but for example, also foodstuffs, which can get more expensive and scarcer when production goes down.”

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They see the same development at Rabobank. “If the tomato grower in Westland had to strike a new energy contract at much higher prices, we would partly take notice in the supermarket,” says economist Hugo Erkin of Rabobank. “Another example is the meat industry: they too may soon pass on higher energy costs to the consumer.”

As everything becomes more expensive, the previous forecast of 1.8 percent inflation by the Central Planning Office for 2022 could definitely go in the trash. Rabobank expects inflation to rise next year by at least one percentage point at current high gas prices.

high inflation

Erkin: “It is almost inevitable that we are already seeing high gas prices in inflation numbers this year. You will get an extra hit next year if prices stay high.” Because although Russian deliveries can lower the price of gas in the short term, Rabobank, like ABN Amro, is based on a structurally higher gas price.

As a result, both businesses and consumers end up paying more. “This is definitely a worrying situation,” says economist Buijs of ABN Amro. “We’ve already seen prices go up, and that’s on top of that. This also points to the need for sustainability, because entrepreneurs who invested in solar panels, for example, are now reaping the benefits.”