Recent dynamics in energy inflation: the role of base effects and taxes

Ieva Rubene and Gerrit Koester

Economic Bulletin Boxes, 2021, vol. 3

Abstract: This box reviews the factors behind the 11-percentage point swing in energy inflation between December 2020 and March 2021, with a particular focus on oil prices, base effects and the impact of indirect taxation. Base effects linked to the collapse of oil prices at the beginning of 2020 pushed up energy inflation by around 5 percentage points between December 2020 and March 2021, and this contribution can be expected to increase substantially further in April. The impact of the marked increase in oil prices since November 2020 has come on top of this. However, the strengthening of energy inflation in early 2021 has reflected not only oil price developments but also changes in taxes and other surcharges – including environmentally motivated measures such as the introduction of carbon emission certificates. Overall, energy inflation plays a prominent role in the temporary rise in overall HICP inflation projected for 2021 and its reduction in early 2022. JEL Classification: E31, Q4, E37, H2, H23

Keywords: base effects; energy; indirect taxes; Inflation; oil prices (search for similar items in EconPapers)
Date: 2021-05
Note: 3015628
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Citations: View citations in EconPapers (5)

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