When will households in Austria benefit from falling gas prices?

Wholesale gas prices have returned to lower levels but households aren’t seeing the benefits – yet. Here’s what you need to know.

When will households in Austria benefit from falling gas prices?
Wholesale gas prices are falling but Austrian households are not seeing the benefits yet. (Photo by Kwon Junho / Unsplash)

Despite prices on the global gas markets dropping, customers in Austria will have to wait longer to see a difference in their bills.

The current price for one megawatt hour of gas is €76 – the lowest value since just before the war in Ukraine broke out in February 2022. At the end of August 2022, the cost was €342, reports the Wiener Zeitung.

However, many Austrian households have recently been told their energy bills will increase in 2023, which means the lower prices will not be passed on to consumers for some time.

READ MORE: ‘There’s not enough gas in the world’: Can Europe keep the heating on this winter?

The reason for this – according to Wolfgang Urbantschitsch, Executive Director at E-Control – is because there is a “time lag” and energy providers are now charging prices in relation to the procurement costs from last summer.

The type of contract that consumers have will also determine how quickly they see a decrease in their energy bills. Those with a market-based tariff (or variable rate) will get a reduction in costs quicker, but they are also more exposed to price increases than households with a fixed-rate tariff.

Alexander Hoor, Wien Energie spokesman, told the Wiener Zeitung that they are currently in the process of adjusting tariffs for new customers, with possible savings of up to 30 percent.

And E-Control boss Urbantschitsch added: “Now a change of provider can be interesting again under certain circumstances.”

So while for many households in Austria there will not be an immediate impact, gas bills should start to decrease over the coming months.

READ ALSO: Warm weather hits Austria’s ski season as slopes left without snow

Why are wholesale gas prices dropping?

In the months leading up to the current winter season, the Austrian government worked overtime to ensure the country’s gas storage facilities were full amid fears of a gas shortage.

However, the autumn and winter has so far been fairly mild, which has reduced the country’s gas consumption.

Plus, as there is a similar situation in many other European countries, there is less demand for wholesale gas so the prices have dropped.

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High inflation: What’s keeping prices high in Austria?

Inflation in the eurozone has been steadily going down, and while the inflation rate decreased slightly in Austria, it is still at high levels. So what is keeping prices high?

High inflation: What's keeping prices high in Austria?

In February 2023, Austria’s inflation rate stood at 10.9 percent, a slight decrease from January, when it was 11.2 percent, according to recent Statistik Austria data.

It’s still higher than the average in the EU (9.9 percent) and much higher than the euro inflation, which was 8.5 percent in February, according to Eurostat.

“The slight decline in inflation from 11.2 percent in January to 10.9 percent in February 2023 is mainly attributable to less pronounced price pressure on household energy and fuels,” said Statistics Austria Director General Tobias Thomas.

READ ALSO: Cost of living: 45 ways to save money in Austria

“By contrast, the price spiral continued to turn in restaurants. Inflation also continued to be felt at supermarket checkouts, with food prices rising by 16.5 percent year-on-year,” he added.

So what is keeping prices high?

Higher costs for housing, water and energy (+16.5 percent compared to February 2022; including district heat +89.2 percent, gas +63.5 percent, solids fuels +76.0 percent, heating oil +29.3 percent, electricity +3.1 percent) turned out to be the most critical price driver, according to Statistik Austria. 

They were followed by food and non-alcoholic beverages (+16.2 percent; food +16.5 percent, non-alcoholic beverages +14,0 percent). 

The more expensive foods include meat, bread and cereal products, vegetables and fruit. However, products such as milk, cheese, eggs, oils, and fats have decreased slightly. When it comes to beverages, coffee was the main contributor to price rises this month. 

READ ALSO: EXPLAINED: 10 ways to save money on your groceries in Austria

The third strongest price driver was restaurants and hotels (+13.4 percent; restaurants +13.4 percent, hotels +13.1 percent). Finally, transport showed price increases of 10.9 percent (fuels +13.6 percent), with fuel prices still high and airline tickets costing significantly more than in January.

While rents rose by an average of 6.3 percent in February, less than the general inflation rate, the cost of maintaining housing increased by 17.9 percent, mainly due to high material costs (up 21.2 percent).