Forecasting Energy Poverty in European Countries: The Effect of Increasing Energy Commodities Prices

Abstract

The impact of the global COVID-19 pandemic has been devastating in many countries, increasing household energy poverty. Lockdown measures have brought the EU economies into recession phases and forced people to stay confined to their homes, aggravating these issues. From the second half of 2021, when the worst seemed behind us, a new threat has appeared threatening economic recovery: the inflationary process in energy prices. This paper aims to verify the effects on energy poverty in European countries following the economic crisis generated by COVID-19 and the current inflationary scenario due to the increase in energy commodity prices through dynamic factor models, estimating the time it will take for energy poverty to return to levels before the shocks that occurred over the past two years. The outcomes show that the overall rise in energy prices (in particular gas) that unexpectedly affected European countries modifies the forecast scenarios, delaying, at best, the first improvements, initially expected as early as 2021, until after 2022.