German Finance Minister: High energy prices will be the new normal, calling for reconsideration of energy policy

Jan 11, 2023

German Finance Minister Christian Lindner predicts that high energy prices will become the new normal in the future. He also believes that Germany's inflation rate will drop to 7% in 2023 and continue to decline in 2024 and beyond.

Inflation in Germany eased slightly year-on-year in November, driven by soaring energy prices and a drop in Russian energy exports. According to data released by the German Federal Statistical Office on December 13 2022, the inflation rate in Germany was 10.0% in November last year, which was slightly lower than that in October, but remained at double digits for the third consecutive month.

"The inflation target in Germany remains at 2 percent. This has to be a top priority for the ECB and the German government," Lindner said in an interview.

Unbiased Energy Policy

In addition, Lindner also pointed out that Germany needs an unbiased energy policy to ensure the development of industry.

He added that German oil and gas hydraulic fracking and nuclear power should be considered in the energy mix along with renewables.

Gas and oil production in Germany has been falling, in part due to a ban on the unconventional hydraulic fracturing and nature conservation regulations making it difficult to secure new drilling permits.

Hydraulic fracturing is a technique that extracts natural gas or oil from shale, clay, marl or coal seams by pressurizing fluids. In this way, difficult-to-access rock beds can be exploited, and oil and gas wells can be significantly stimulated

However, this method has both advantages and disadvantages. Many pollutants, such as fracturing fluids and reservoir fluids containing radioactive substances, heavy metals, and hydrocarbons, will also flow out along with the compressed oil and gas.

Germany has banned Hydraulic fracking since 2017 for environmental reasons. But amid the ongoing energy crisis, there are growing calls to rethink it to extract the country's natural gas.

Lindner said bluntly that the ban on Hydraulic fracking should be lifted.