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Germany's Energy Spending Could Drop If Power Prices Remain Low

Germany could end up spending less than planned on its power and gas support packages if prices don’t spike again, the German Finance Ministry told Reuters on Tuesday.

Germany introduced at the end of last year so-called energy price brakes to support households and businesses against the impact of soaring energy prices. The government said it would allocate $217 billion (200 billion euros) for the so-called “defensive shield.” At the end of September, the German government ditched earlier plans for a gas levy on consumers and instead introduced a gas price cap to curb soaring energy bills. 

Last autumn, the German government was planning to spend as much as $90.4 billion (83.3 billion euros) on funding the planned cap on electricity and gas prices in 2023. The proposed financing for energy price caps would represent 42% of the planned 200-billion-euro “defensive shield.”  

Now that energy prices have dropped from the records set at the end of the summer and early autumn of 2022, Germany could spend less on the energy bill relief packages.

But “The actual financial needs depend heavily on the further development of gas and electricity prices for end consumers,” a spokesperson for the Finance Ministry told Reuters when asked if the lower energy prices in recent weeks would change the forecast of spending on the package. 

The mild weather at the start of 2023, comfortable gas inventory levels, and still weak demand in Asia dragged European benchmark gas prices down to a 16-month low on Monday. That was due to “ample supply and on reports Chinese importers are trying to divert February and March shipments to Europe amid weak prices at home and high inventories,” according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Norway became Germany’s single-largest natural gas supplier in 2022, overtaking Russia, as total German gas imports dropped by 12.3% compared to 2021, the German Federal Network Agency, Bundesnetzagentur, said earlier this month. 

By Tsvetana Paraskova for Oilprice.com

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