5 May 2016
The researchers at Orkestra’s Energy Department presented a report today on the impact of energy prices on business competitiveness.
They have analyzed, in a detailed study, the impact of energy prices on the competitiveness of Basque and Spanish industry. To this end, they examined production processes in energy-intensive sectors, such as steel-making, glass, paper, cement, timber, chemicals and rubber. Throughout the period analyzed in the study (2000-2015), the price of electricity, gas and other fuels increased steadily, in spite of the volatility of the prices of some energy resources at certain times on the international market.
The main conclusion to be drawn from the study is that the price of energy is a determining factor in the competitiveness of some industries which find themselves in a disadvantaged position compared with their competitors in other countries like Italy, Germany or France. The increase in energy prices, with which Spanish and Basque industries have to deal, cannot impact upon sales of their products, which generates a significant comparative disadvantage in costs. This situation is exacerbated by the actions of some countries which limit the increase in energy prices through exemptions.
Therefore, the impact of energy prices upon the sectors analyzed is considerably greater than the European Union (UE-27) average. On average, the price of energy has risen 19% more than the price of the products offered. This figure is in stark contrast with the reality of other countries like France, where the increase has been 9%, or Germany, with 3%.
The position of disadvantage affects above all those sectors that have to compete in international markets, or cases in which differences in costs between different plants belonging to the same corporate group impact upon production or investment decisions. Thus, particularly sensitive to this circumstance are those sectors in which products are less differentiated and compete in global markets.
The need to address this competitive disadvantage has obliged companies to reinforce other variables such as innovation in products and services, the potential for product differentiation or brand value, cost levels, productivity, etc. In other words, to seek other competitive advantages in order to cope with the negative impact resulting from energy bills, given that while the cost of energy is important and may be decisive, it cannot be solely and exclusively responsible for the success or failure of an industry.
Another aspect highlighted by the study is the increase in gas and electricity consumption in the industrial sphere compared with other sources of energy. The evolution trend reflects a reduction in the importance of other fuels in production processes in industry, and there are sectors that are fundamentally consumers of electricity (steel-making, paper pulp and rubber), and others of gas (paper, cardboard and glass).
You can access the complete study here.
