According to a study by the New Economics Foundation (NEF), recently published, every 10% increase in oil and gas prices can raise overall inflation in Europe by up to 0.36 percentage points. The researchers also concluded that a 50% increase in these fuel prices could raise inflation by up to 1.8 percentage points the following year. The study notes that oil prices rose by approximately 47% between June 2025 and June 2026, and by 67% between June 2021 and June 2022.
The study indicates that rising fossil fuel prices represent the biggest inflationary risk in all countries analyzed, with the exception of two, and were among the five biggest risks in all countries studied. For Portugal, assuming a 20% pass-through of the total effect within one year, inflation would increase by 1.02 percentage points in the event of a 50% shock to coke, petroleum products, and energy supply prices.
The New Economics Foundation recommends that the European Central Bank establish a specific lower interest rate for green investments, such as wind and solar energy, arguing that Europe is ill-prepared to face these shocks due to high interest rates that make the construction of renewable energy infrastructure expensive. The study highlights that renewable energies are produced domestically, are protected from geopolitical risks, and are not subject to financial speculation, while the IMF concluded that each additional percentage point of renewable energy share reduces wholesale electricity prices by an average of 0.6%.
The report concludes that expanding domestically produced wind and solar energy is essential to limit inflation, as it reduces Europe's exposure to fossil fuel price volatility. This report comes at a time when Ursula von der Leyen is expected to address the climate issue in the state of the union speech, scheduled for next Wednesday.
