How are expats affected by rising costs of energy worldwide?

  • man holding energy bill
Published on 2022-09-19 at 10:00 by Asaël Häzaq
Rising inflation, the Ukraine war, not to mention other wars and conflicts which aren't in the limelight of international media, have been affecting energy costs over the past months. Is it still safe to plan a move abroad under these conditions? How are expatriates affected by such rises?

Is the world heading towards energy poverty?

No continent is safe from the risk of energy poverty. So-called wealthy countries, as well as less wealthy countries, are suffering from the consequences of multiple crises, the last of which have been the pandemic and the war in Ukraine, which are making fuel prices skyrocket. This situation is, of course, even more dire for countries that were already vulnerable.

The challenge of electrification in Africa

A paradox: countries that have oil reserves are not faring better than others. Africa remains the least electrified continent on the planet, with over 600 million people living without electricity. This number rose by 4% in 2021. The situation is even more critical in Sub-Saharan Africa. The high demand worldwide (which has intensified since the economic recovery) and inflation are affecting the price of energy. African countries are struggling to obtain energy. Cases of load shedding and energy rationing are increasing. This situation is curbing the growth of companies, worsening the hardships of families, and increasing the number of energy-poor households. In Rwanda, inflation has exceeded 14%. In Senegal, it is close to 9%, as compared to only 1% in 2019. The general hike in prices has, for that matter, dominated debates during the last Senegalese parliamentary elections, which were held on July 31, 2021.

The threat of energy poverty in Europe

According to the European Commission, energy poverty affected 35 million people in 2020. This number will certainly increase this year and next year. The leading causes: are the hike in the price of energy and the rise in social inequality. In Germany, 62% of food banks registered an increase of over 50% in visits. More than a third have had to turn down applicants. Similar situations have been reported in Spain, France and the Netherlands. In Portugal, around 18% of the population is at risk of poverty.

The United Kingdom illustrates this economic storm well. The latest measures by the government are unlikely to turn the tide. Starting from October, the regulated tariff for gas will rise once again by 80%. The government hasn't ruled out another increase next year. An unavoidable measure, according to Ofgem, the Office of Gas and Electricity Markets: “The increase reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.” The regulating body doesn't have a reassuring forecast for 2023, either. Besides the price of energy, consumer prices also risk rising sharply.

According to York University, energy poverty is threatening two-thirds of British households. As the United Kingdom heads towards a recession, Ofgem and the heads of companies are calling for urgent measures. The economic pressure on British households is the highest among G7 countries. Nadhim Zahawi, the Minister of Intergovernmental Relations and Minister of Equalities, has promised emergency relief: “400 pounds off people's energy bills, 650 pounds off for vulnerable households and 300 pounds off for pensioners.”

Social unrest is intensifying around the world

The world is facing a shortage of energy, and as prices go sky-high, social unrest is mounting. A recent study by the global risk and strategic consulting firm Verisk Maplecroft carried out in 200 countries revealed that over half of them are experiencing a rise in social unrest. Countries that have been spared from the most violent or disruptive protests are on the brink of suffocation.

In June, thousands of South Korean drivers protested in the streets of Seoul, the capital of South Korea. More than 7000 people also protested in other South Korean cities due to the rise in the cost of fuel, which has penalized their whole industry. South Korean drivers also protested against a low minimum wage. The newly elected president Yoon Suk-yeol, who has conservative and pro-business politics, has been unswerving when confronted with social unrest. But for how long? South Korean drivers say they are “desperate,” and they are not the only ones. Between January and July 2022, inflation climbed from 3.6% to 6.3%. It's the highest inflation rate ever reached since the 1998 Asian financial crisis. Although inflation decreased slightly to 5.7% in August 2022, social concern and anxiety are still at their highest. The price of gas and electricity has soared by 15.7%. The price of food, meanwhile, has increased by over 6%.

The United Kingdom is facing endless protests. Barristers, railroad workers, postal workers, drivers, delivery workers, sanitation workers, etc. Everyone is hitting the streets to protest and call for strong measures from the government. In the UK, inflation has exceeded 10% --- the highest rate in 40 years. Discontent is also mounting in the United States, Brazil, Ecuador, Bangladesh and Poland. Although Algeria has rich oil reserves, it hasn't been spared by the crisis. In April, Algerian civil servants went on a general strike. The country, the leading fuel exporter of the African continent, also provides Europe with 11% of its gas consumption. But political and economic instability prevents it from truly enjoying the benefits of that export. In South Africa, protests against rising energy costs ended in tragedy. On August 1, four people were killed by gunshot. The police had opened fire, but a link hasn't been established between their shots and the deaths of these people. Unemployment rates, poverty rates, social inequality, racism, and corruption are all on the rise, and the country seems to be at a breaking point.

What is the impact on moving abroad plans?

 “We must surely be able to live somewhere. We can't relocate to Mars,” says a Spain-based expat ironically. She moved to her expat country last year and wants to deal with this situation with a philosophical edge. “We've got no other choice. What else can we do?” People have started moving abroad again with border reopening, with “a few adjustments.” On a more positive side, multiple countries (Canada, the United States, Switzerland, France, etc.) are eager to hire international talent. Still, on the flip side, living costs keep getting higher while salaries aren't always high enough.

Experts are divided on the issue of whether salaries should be raised. In South Korea, companies gave way to the pressure from trade unions and increased wages. The South Korean Minimum Wage Commission raised the minimum wage by 5%, or 9,620 wons (about 7,09 euros). Faced with a global crisis that is here to stay, it's important to tame fires.

Some expats are becoming eco-friendly. When it comes to traveling, they write off faraway destinations and prefer neighboring countries. Some of them are taking a step further by adopting an eco-friendly lifestyle. NGOs and environmental organizations are heading in the same direction. Measures for energy sobriety that are being implemented by countries are, above all, commonsensical. The earth is heating up despite the developments in green manufacturing and green energy. Last June 15, REN21, a think tank for renewable energy policies, revealed that many “green commitments” haven't been fulfilled. In fact, many countries are turning to fossil fuels again to counteract the decisions of the Russian government. For ecological expats, it's important to “make everything green again, and fast.” They do know, however, that their message can be misunderstood at a time when energy poverty is increasing around the world. But for them, it's precisely the right moment to create sustainable economies for today's world and tomorrow's.