Tumble in wholesale electricity prices sharpens focus on elevated consumer bills

Economist Jim Power said: 'When global prices went up, they were passed on quite quickly'

The Central Statistics Office's consumer price index published earlier this month showed that consumer prices for electricity, although easing in July from June, were still almost 32% higher than July 2022. 

Wholesale electricity prices fell last month at their sharpest rate since before the invasion of Ukraine, re-fuelling the debate about whether households and businesses are being short-changed.

The Central Statistics Office said its index that tracks wholesale prices across the whole economy fell by 5.2% in July from the same month last year, marking the largest fall in annual wholesale inflation for over two years. 

In a commentary, the Central Statistics Office highlighted the sharp fall in electricity prices in the latest month, which meant that wholesale electricity costs were 64% down from July 2022, and "lower than any time during the past two years". 

Wholesale electricity prices in July 2023 fell to their lowest level since June 2021https://t.co/fJOHJ5nT9C#CSOIreland #Ireland #Wholesaleprices #Prices #Business #BusinessStatistics #IrishBusiness pic.twitter.com/VWzcmZt8W3

— Central Statistics Office Ireland (@CSOIreland) August 22, 2023

However, its consumer price index published earlier this month showed
consumer prices for electricity, although easing in July from June, were still almost 32% higher than July 2022. 

The figures will nonetheless spur hopes the sharp de-acceleration in global energy prices that got under way much earlier this year will continue to feed through to energy-intensive products. Wholesale prices of European gas and crude oil have fallen, but whether the full benefits of wholesale price disinflation will be passed on to consumers remains to be seen.  

Economist Jim Power said the fall in wholesale prices would intensify the debate about whether Irish households and businesses are fully benefiting from the sharp fall in global wholesale energy prices.  

"Electricity prices down by an annual 64% is pretty dramatic and it will put the focus on how quickly wholesale prices will be passed on," Mr Power said. "When global prices went up, they were passed on quite quickly," he said. 

Other wholesale prices

Elsewhere, the fall in wholesale prices in energy-intensive industries such as food manufacturing was less dramatic: Wholesale food prices overall fell by 8.1% from July last year, led by a sharp decline of 17.4% in wholesale dairy prices. 

However, the figures show wholesale fruit and vegetables, up almost 15% from July 2022, and the prices of fish and fish products, which rose by 1.4%, defied the trend.  

And the wholesale prices of building products fell only slightly in July from June, and were 2.4% higher than a year earlier, the figures show.  Wholesale prices of ready mixed concrete were still up 15% from a year earlier, although other energy-intensive products, such as steel and reinforced metals, were down by 8% in the same period. 

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Meanwhile, there was mixed news for wholesale energy prices ahead of talks aimed at resolving a potential strike at a major liquified natural gas, or LNG, exports facility in Australia. 

Potential strikes risk interrupting as much as 10% of global supplies, while Asia and Europe prepare for the winter heating season, Bloomberg News reported. Both regions vie for a limited amount of LNG worldwide. 

Wholesale gas prices in Europe climbed 5% at one stage in the latest session to reach over €43 per megawatt hour. The contract for wholesale gas for delivery in December also rose sharply, to €59.50 per megawatt hour.