Greek consumers should prepare for new price increases on goods and services. The third major international crisis in sequence, following the pandemic and the war in Ukraine, is here and will certainly lead to a new inflationary wave, though its magnitude remains unknown. It’s not just energy commodity price hikes that have driven Brent oil prices up 20% and Dutch TTF natural gas contracts up 60% over the past week. Supply chain disruptions, increased maritime shipping rates, and flight suspensions over a large and vital region are also contributing factors.
All these factors constitute the perfect recipe for creating new inflationary pressures. Fuel prices at gas stations have already started rising, with gasoline (95 octane) selling up to 4 cents more expensive and diesel over 10 cents higher. The same 10-cent increase was recorded for heating oil, now selling at 1,250-1,300 euros per thousand liters. This is the first time heating oil has reached this price during the winter season. Fortunately, this development occurs when winter is behind us. However, many Greek families may still face one or two more tank refills.
The new price increases mean each refill costs 100 euros more per thousand liters. Fuel price increases would have been even higher for Greek consumers if the euro hadn’t strengthened against the dollar during this turmoil. The euro-dollar exchange rate moved to $1.16, compared to $1.18 previously, and since fuel purchases are made in dollars, Greek consumers saved a few euro cents per liter on gasoline and diesel prices at pumps. The government is concerned about fuel developments. According to sources, since last Saturday, after the first American-Israeli strikes on Iran, the Inter-Service Market Control Unit (DIMEA) has stopped dealing with anything else and begun inspections at gas stations and petroleum companies.
Prime Minister Kyriakos Mitsotakis set the tone, telling Parliament that “any fuel increases should be considered inevitable.” However, he added, “there’s a difference between calculated increases from raw material price rises and unbridled profiteering. Therefore, if required, special measures will be taken to control potential excessive price hikes.”
Measures being planned amid the Middle East crisis
Both the government and the Development Ministry, bearing the burden of high prices, are particularly concerned about events in the Persian Gulf. This is because Greek consumers, especially vulnerable households, have been hit by inflationary waves following the pandemic. Three-level measures are now being planned:
– First, ensuring adequate supply of goods
– Second, combating potential profiteering
– Third, supporting vulnerable households when justified and excessive price increases occur. Government sources note that adequate supply will exist, but they greatly fear price increases on goods.
Contributing to this direction are shipping rate increases for transport services, as both the Strait of Hormuz and airspace over the Middle East have now closed. Many Greek companies exporting to Middle Eastern countries will now struggle to transport their products either by air or sea, unless they make the journey around Africa. But even if someone is willing to make such a detour, products may not reach their destination. Shipping company Hapag-Lloyd completely stopped container shipments to the upper Persian Gulf since last Tuesday. As stated on its website, “Hapag-Lloyd has decided to implement a booking suspension with immediate effect and until further notice for all cargo types to the following countries (both from and to): United Arab Emirates, Iraq, Kuwait, Qatar, Bahrain, Oman (Sohar), Saudi Arabia (Dammam and Jubail), Yemen.”
CMA-CGM and Cosco made similar moves. Previously, these companies had imposed new freight charges of $1,500-4,000 per container depending on the company and container type transported to and from the Persian Gulf. The above shows that beyond fuel price increases, which are here now, economic growth will also take a hit.
It should be noted that the 2026 Budget was prepared with the European Commission’s estimate of Brent oil at $62 per barrel, and this week its price moves above $84 per barrel. Everyone hopes it stays there without further increases, although many see it potentially exceeding $100.
According to the ECB, if natural gas remains above 50 euros/MWh and oil above $100, European growth will be limited by 0.75% and inflation will rise by 1.25%.
This means inflation above 4% and growth near 1% for Greece. The positive aspect for our country is that the Recovery Fund expires this year, so significant money will flow into the market – approximately 17 billion euros from the Public Investment Program alone. However, we should see the real impact of the Middle East war once hostilities cease and the situation in the region stabilizes.
Published in Parapolitika
