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Despite Soaring Inflation, EU Says Won’t Extend Emergency Energy Measures

Emergency energy price measures implemented by the European Union in 2022 will not be extended further, the European Commission said on Monday, bringing to an end hundreds of billions of dollars in tax cuts, subsidies and other incentives.

Citing electricity prices that have dropped to under 80 euros per megawatt-hour and a major drop in gas prices, the Commission said that a repeat of 2022’s electricity price spikes were no “less probable” for next winter, Reuters reports.

The emergency measures, initially proposed in September last year included electricity demand reduction efforts, power plant revenue caps and price setting regulations for retail distribution.

In March this year, the members of the European Union agreed to extend one aspect of the emergency measures–the 15% voluntary gas demand reduction target–for 12 months until March 2024.

In terms of inflation, a deal to forego another extension of the emergency energy measures comes at a difficult time for many European consumers.

While inflation in Europe has declined to 6.1%, relief has yet to reach consumers.

Italy has seen a 7.6% drop in inflation, followed by Germany with a 6.1% drop and France with a 5.1% drop. The three countries are the largest euro economies in the EU.

While down from 7% in April for countries using the euro as their official currency, and a far cry from the double-digit inflation experienced in the fourth-quarter of last year, consumers are still struggling and economists have warned that it could take months for retail prices to begin to drop noticeably, Euronews reports.

In May, food prices in the eurozone spiked 12.5% from a year ago, but that was a slightly lower spike than the 13.5% bump in April. Falling energy prices have been the main contributor to lowering eurozone inflation, down in May 1.7% from a year ago. 

By Charles Kennedy for Oilprice.com

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