The energy companies have raised their prices up to 50 points above what their costs have increased

2023-08-29 02:33:14

It is a fact that companies have had to increase their prices to assimilate the increase in costs that has occurred since 2019 due to the coronavirus pandemic and the subsequent Russian invasion of Ukraine. And it is also true that not all have done so in the same amount. A reality to which the Bank of Spain has put figures, which points to the energy sector as the one that has increased prices more than its costs have increased.

In an article entitled “The transfer of the increase in production costs to the sale prices of non-financial companies in 2022”, the institution ensures that the “strong” increase in the price of energy and other raw materials in the second Half of 2021 and a good part of 2022 implied a “notable” increase in the production costs of companies, which transferred a substantial part of this increase to their prices, but not in a heterogeneous way. In fact, it points out that in most of the main economic sectors there was a very high, “practically complete” transfer of higher production costs to sales prices in 2022, both with respect to 2021 and in comparison with the existing situation. in 2019, before the pandemic.

Superior

In the electric power, gas, steam and petroleum refining sectors, however, sales prices grew above their adjusted unit costs. In fact, compared to the years 2021 and 2019, these companies increased their prices in 2022 between 42 and 50 percentage points more than they increased their costs. Prices also rose above costs in the transport and storage sector and in the hospitality sector during the period 2021-2022.

Compared to 2019, in addition to electricity, gas and oil refining, the wholesale trade and construction branches raised their sales prices to a greater extent compared to the increase in unit production costs. In the branches in which prices are “historically more rigid”, the transfer of the rise in production costs to sales prices was slower.

Reason for increases

The Bank of Spain also highlights that those economic activities with greater intensity in the use of energy, such as the branch of the metal transformation industry and the chemical industry, registered a more intense increase in unit costs than in the other manufacturing subsectors. Along the same lines, a sharp increase in unit production costs was observed in the energy and oil refining sectors.

However, the institution headed by Pablo Hernández de Cos also points out that there were exceptions. Thus, the branch that includes the food and textile industries would have experienced “substantial” increases in their unit production costs in 2022, despite not appearing among those in which energy costs have a higher weight in their costs. According to the regulatory body, this circumstance would be indicative that these sectors use other raw materials whose prices have also increased “notably”, partly as a consequence of the increase in energy prices, “significantly pushing up their production costs”.

The rise in these prices, as explained by the Bank of Spain, has a negative impact on the real volume of sales. However, the Bank of Spain notes that the direct impact of higher production costs on employment and average wages is nil due to the “rigidity” of these variables in the short term. However, productivity has suffered as there is less activity and the same wage bill. “Since the increase in prices produces a drop in production with the same employment, this translates into a decrease in labor productivity. On the other hand, since there are no effects on employment and average wages, the wage bill does not is affected, but the fall in productivity generates, in the short term, an increase in the unit labor cost”, he summarizes.