Following strong increases in early 2022, transport fuel prices decreased in most OECD countries in 2023 with a slight uptick in the second quarter of 2023. The OECD mid-grade gasoline average price went up from 1.20 USD/l in Q1 2023 to 1.24 USD/l in Q2 2023, although this level is 7.7% lower than in 2022. End-use prices for transport fuels differ across countries, depending on the share of taxes and governmental measures aimed at sheltering consumers from price variations.
Gas, coal and electricity wholesale prices were already exceptionally high in the second half of 2021 as a strong post Covid-19 recovery drove energy demand. Households also faced record energy costs, though the price spikes were less extreme than those on wholesale markets. Long-term contracts, financial hedging and utilities’ ability to amortise costs already prevented price spikes in global fuel markets from fully cascading to consumers, especially in the power sector where generation represents less than half of total electricity cost. Still, affordability measures played a sizeable role in 2022. Governments mobilised nearly USD 900 billion to shield consumers from high prices. At least ten major economies directly stepped-in to control energy prices, by compensating utilities directly for losses or by temporarily cutting taxes and charges on energy.
Nonetheless, retail natural gas prices increased by at least 30% in major European economies and in the United States in 2022. In the United Kingdom, where government measures focused on bill rebates rather than reduced taxes and charges, households had to pay 90% more per unit of gas.
Retail electricity prices also rose by 25% in Japan and Spain and by over 45% in the United Kingdom and Italy, and there were substantial price hikes in South Africa and Korea. However, tax cuts, other price stabilisation measures and lower dependence on imported fossil fuels tamed the price increase in many other major economies. Replenished hydropower dams even brought down electricity prices in Brazil.
In Turkey, where overall inflation was already extremely high, nominal prices for natural gas more than doubled, while in Argentina residential energy prices rose by around 50%. Although part of these increases were due to generally high overall inflation, they still created substantial challenges for low-income households in particular as wages often did not catch up quickly enough. In all other major economies where energy prices for consumers increased, the trends were still considerable even when adjusted for broader inflation, for which rising energy prices are a key driver.
Early numbers for 2023 show that wholesale energy prices may have passed their peaks and have largely returned to 2021 levels. However, retail prices are unlikely to fall that quickly, as many suppliers hedged electricity and natural gas when wholesale prices were much higher. Residential electricity and gas prices in the European Union have already started to fall on average, though they still remain above 2021 levels. In the United States, prices for residential electricity and gas are also likely to decline. In other regions, consumers might continue to face high energy prices in 2023. For example, the Japanese government recently allowed major power companies to raise tariffs by 10 to 40%.