The full impact of rising fuel prices will not be felt until six months from now, according to René Winkin, director of the Luxembourg Federation of Industrialists (FEDIL). Speaking on RTL on Friday morning, Winkin discussed the current energy price increases and their implications for industry.
Nearly three weeks after the start of the conflict in Iran, fuel prices continue to climb. For the first time since mid-May 2022, a litre of diesel at Luxembourg petrol stations now costs over €2 – an increase of 15 cents from Thursday to Friday. Winkin explained that these prices affect the Luxembourg market with a slight delay, particularly for companies that buy on the “spot” market, meaning they purchase at today’s rates.
Such companies are currently facing very high gas costs, while raw materials are also becoming more expensive. Bottlenecks are already emerging for polymers and a number of products originating from the Middle East.
According to FEDIL estimates, by Thursday the price increases could already account for over a quarter of an index tranche. With petrol, this impact is felt relatively quickly due to its high weighting in the index. For heating oil in particular – which carries fewer taxes – the percentage increase is even higher than for other fuels.
As transport becomes more expensive, Winkin noted, it must be assumed that the goods being moved back and forth, which later end up in supermarkets, will also rise in price. The situation is reminiscent of 2021, when major price hikes – driven by a combination of factors related to the Covid-19 pandemic, lockdowns, and supply chain disruptions – took months to fully materialise.
“Back then, we only really saw the effect on inflation six months later. But we already saw it coming in the summer of 2021", Winkin observed.
For that reason, Winkin described the current discussion around a structural adjustment to the minimum wage as “unspeakable”. He justified his position by pointing out that the minimum wage is already indexed and therefore adjusted every two years anyway.
“This is completely out of place at this time”, he said. He added that such a measure does not address the challenges arising from price hikes, particularly for those struggling with housing costs: “The fact is: there is a shortage of petrol, a shortage of gas, and in the future, a number of other products will be in short supply.”
Consequently, demand will inevitably have to decrease, according to Winkin, which will in turn slow the economy. He argued that targeted measures should be introduced where genuine social issues arise. As for businesses, Winkin said they intend to conduct regular monitoring alongside the government in order to identify potential problems early and determine how best to address them.
