World Energy Outlook 2006

prices rebounded sharply in 2003 and 2004 – by proportionately more than oil
prices – but stabilised in 2005 (Figure 11.4). By the first quarter of 2006, the
price of steam coal was about 51% above the average level of 1992-2002.
index (1Q 2002=100)
300
250
200
150
100
Figure 11.4: Average IEA Crude Oil and Coal Import Prices
50
1Q1992 1Q1994 1Q1996 1Q1998 1Q2000 1Q2002 1Q2004 1Q2006
Crude oil Steam coal
Final Prices to End Users
In general, the prices paid by final energy consumers have increased as much
as international or wholesale prices in absolute terms, but far less in
percentage terms. In the case of oil products, this is mainly because of the
dampening impact of taxes and subsidies. Excise duties, which are levied at
a flat rate per volume, cushion the impact on the final prices of oil products
of increases in international prices. The higher the level of duty on a given
fuel, the less the final price will increase proportionately relative to the
international price. Subsidies – often in the form of price controls – can also
prevent higher international market prices from feeding through fully into
local energy prices. In addition, distribution costs and margins – which
make up a significant part of the final price – have increased much less than
bulk prices. As non-fuel costs account for a significant share of the total cost
of electricity supply, increases in generation fuel costs lead to much smaller
increases in final electricity prices – even where all of the cost increases are
passed through. In the OECD, for which good price information is
available, final coal and gas prices have increased more in percentage terms
than the prices of oil products and electricity (Figure 11.5).
Chapter 11 - The Impact of Higher Energy Prices 275
11
© OECD/IEA, 2007