EXPLAINED: Why are gas prices still so high in Austria?
Austrian households are paying more for gas than elsewhere in Europe. So why are prices so high?
Gas prices in Austria reached their highest peak in early 2023 and have since remained at around the same level.
The significant increase in gas prices in the country sets it apart as a special case compared to other European countries. The reasons behind this situation lie in a combination of different factors, including the dominance of a few suppliers, increased margins of energy suppliers, and customers unwilling to change suppliers or because they are locked into long-term contracts.
Here we go into detail about the different factors.
Dominant suppliers
The energy market in Austria is dominated by a few state-owned or semi-state-owned suppliers, such as Wien Energie, OMV, and EVN. This lack of competition allows the dominant suppliers to control pricing, potentially leading to higher prices for customers.
Increased margins of suppliers
It has been possible for Austrian energy suppliers to increase their profit margins in response to the rise in gas prices. They have adjusted their pricing indexes to correspond to the higher cost of gas, and therefore maintained or sometimes even increased their profit margins.
READ MORE: Where in Austria will electricity and gas prices rise and fall in 2024?
Delayed price adjustment
The fluctuations of gas prices in Austria are passed on to customers but there is a longer delay compared to other European countries.
This delay, in combination with long contract lock-ins and backward-looking pricing, creates a situation where customers may continue to pay a higher price even if the market prices drop. For example, in autumn 2023, Wien Energie made an offer to its gas customers if they committed for one year. Since then, gas prices have decreased, but the customers were still locked into their contracts.
Low customer switching rate
Customers in Austria show low willingness to change energy suppliers. This results in them sometimes staying with their current provider despite higher prices, a situation which reduces competition in the market and allows suppliers to maintain higher prices.
Impact of gas supplier contracts
Even if long-term gas supply contracts with Russia may have been intended to secure cheaper gas prices, market changes and disturbances in supply have led to increased costs for energy suppliers and thereby also for customers.
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Gas prices in Austria reached their highest peak in early 2023 and have since remained at around the same level.
The significant increase in gas prices in the country sets it apart as a special case compared to other European countries. The reasons behind this situation lie in a combination of different factors, including the dominance of a few suppliers, increased margins of energy suppliers, and customers unwilling to change suppliers or because they are locked into long-term contracts.
Here we go into detail about the different factors.
Dominant suppliers
The energy market in Austria is dominated by a few state-owned or semi-state-owned suppliers, such as Wien Energie, OMV, and EVN. This lack of competition allows the dominant suppliers to control pricing, potentially leading to higher prices for customers.
Increased margins of suppliers
It has been possible for Austrian energy suppliers to increase their profit margins in response to the rise in gas prices. They have adjusted their pricing indexes to correspond to the higher cost of gas, and therefore maintained or sometimes even increased their profit margins.
READ MORE: Where in Austria will electricity and gas prices rise and fall in 2024?
Delayed price adjustment
The fluctuations of gas prices in Austria are passed on to customers but there is a longer delay compared to other European countries.
This delay, in combination with long contract lock-ins and backward-looking pricing, creates a situation where customers may continue to pay a higher price even if the market prices drop. For example, in autumn 2023, Wien Energie made an offer to its gas customers if they committed for one year. Since then, gas prices have decreased, but the customers were still locked into their contracts.
Low customer switching rate
Customers in Austria show low willingness to change energy suppliers. This results in them sometimes staying with their current provider despite higher prices, a situation which reduces competition in the market and allows suppliers to maintain higher prices.
Impact of gas supplier contracts
Even if long-term gas supply contracts with Russia may have been intended to secure cheaper gas prices, market changes and disturbances in supply have led to increased costs for energy suppliers and thereby also for customers.
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