Electrification shields households from oil and gas-related inflation pressure – report

Households that use electricity from their own solar panels to heat their homes and charge their electric car have been far less affected by the inflation caused by this year’s oil price hike, environmental NGO Greenpeace has found in an analysis. Prices for a model German household using a heat pump, an electric vehicle and a private rooftop solar system connected to a household battery would have seen their living costs rise by 1.5 percent between January and August 2026, compared with 2.5 percent for the official consumer basket.

Global oil prices shot up after the launch of the US- and Israeli-led war on Iran at the end of February, which led to a closure of the Strait of Hormuz, a key oil and gas shipping lane. Germany and many other parts of Europe were facing a smaller supply shock than after Russia’s invasion of Ukraine in 2022 thanks to more diversified imports, but global price increases sent fuel prices soaring, pushing up overall inflation. 

“Those who want price stability in the long run need to reduce the fossil dependence,” said Greenpeace finance expert Mauricio Vargas. “Our dependence on oil and gas is making consumers more susceptible to geopolitical crises and the price hikes that come with them.” 

Had the oil price stayed at its January level, Germany’s annual inflation rate in August would have been 1.9 percent instead of the current 2.9 percent, the NGO calculated. In the euro area, it would have been 2.2 percent instead of the actual 3.2 percent. Energy cost 15 percent more than a year ago in September in Germany, while core inflation, which excludes food and energy, stood at 2.4 percent, according to statistical office Destatis. Since 2020, annual inflation for the electrified model household would have been on average 0.4 percentage points below the official inflation rate, Greenpeace said. 

The Greenpeace calculations assumed that the electrified model household produces 70 percent of the electricity it consumes, and does not include equipment costs. The installation of heat pumps or home batteries is relatively expensive, meaning many energy transition technologies are more difficult to access for low-income households and tenants.

Greenpeace said central banks could help reduce dependence on fossil fuels by clearly labelling them as a recurring source of inflation, and suggested programmes to promote green lending. “Central banks must take on this debate and highlight more strongly the risk our dependence on oil and gas poses to price stability,” Vargas said.

The government is supporting electrification with measures including a new income-based purchase premium for electric vehicles and co-funding for heat pumps. However, critics say other measures such as a fuel tax cut or EU plans to weaken the combustion engine vehicle phase-out are having the opposite effect.