Goldman Sachs: Average EU energy bills could reach CZK 12,300 a month

The average Czech household will pay roughly CZK 12,300 per month for energy at the beginning of next year according to an analysis by American investment bank Goldman Sachs. The estimate is based on the current price development of futures contracts.

Goldman Sachs said that at the beginning of next year, energy bills across the EU, which includes the Czech Republic, are expected to reach around 500 euros per month for a typical household.

In a note to investors released on Sunday, Goldman Sachs said European households’ bills will surge by 2 trillion euros at their peak early next year, and that this situation calls for government intervention.

At their peak, energy bills will represent about 15 percent of Europe’s gross domestic product, the note said, according to news agency Bloomberg. The repercussions of the current energy situation will be even deeper than those of the 1970s oil crisis, Goldman Sachs’ analysts stated.

In an online comment, economist Lukáš Kovanda said that in the case of the Czech Republic, the number should be taken as a guide. “There are noticeable differences in the economic performance and purchasing power of the population between individual EU member states,” he said.

“However, for example, electricity prices in the Czech Republic are among those that are significantly above the EU average, even in absolute terms, without taking into account the purchasing power parity. When compared with the application of purchasing power parity, Czech households have one of the highest electricity prices in the EU,” Kovanda said.

Purchasing power parity compares prices to average wages to create a more level picture of a local economy.

Kovanda noted the European Commission is now proposing a measure that all power plants other than gas would have to turn over to the government part of their profit above a critical ceiling. The money raised from the profit ceiling would be used by individual governments of the EU members to pay for programs to help households and businesses offset the impact of energy rising prices.

“This would help to cushion the adverse social impact of dramatically increased energy prices for households, rising by around 200 percent year-on-year on average in the EU, which Goldman Sachs forecasts for 2023 in the above-mentioned report,” Kovanda said.

The Czech Republic has already launched a subsidy program and created a website with an online calculator and other details.

EU ministers responsible for the energy sector will meet Friday as part of the current Czech presidency of the EU to discuss the situation.

Energy prices have been rising dramatically due to the conflict in Ukraine. The EU is heavily dependent on Russia for both gas and oil, and has been scrambling to find alternative sources. Russia has also been limiting the amount of fuel it is sending to the EU, for example by shutting down the Nord Stream gas pipeline.

The Czech Republic has been seeking alternative sources for natural gas and has secured storage capacity in a liquefied natural gas terminal in the Netherlands.