Explained Simply: 2022 Wood Fuel Price Increase
Fuelwood products are about to become more expensive in Europe due to recent geopolitical events.
The biggest success story of 2021 was how the European wood fuel market managed to avoid industry-wide price increases despite all odds. This made fuelwood an even more attractive heating option to households all over Europe. Especially when compared to gas and electric heat, the prices of which rose sharply in the last few years as part of the wider European energy crisis.
2022 Wood Fuel Price Crisis
Everything changed in February 2022. As we discussed in a previous blog post, Russia’s war in Ukraine has made it impossible for wood fuel prices to remain low.
As most of you know, a very large portion of wood fuels sold in Europe comes from Eastern Europe. Now, due to Putin’s war, importing wood fuels from Russia and Belarus became impossible. And importing them from Ukraine is also incredibly difficult.
As a result of this, Europe is experiencing a severe lack of wood fuel supply. And the fundamental rules of supply and demand indicate that wood fuel prices will increase as a result of this.
Our manufacturing partners are already seeing the effects of this. Most of them have reported price hikes for certain types of raw wood material. On top of this, rising energy prices increase their manufacturing costs. Being one of Europe’s biggest wholesale suppliers of firewood, we can negotiate the best prices with them. Despite this, prices will rise even for our wholesale clients.
Opportunity in Adversity
This being said, it’s not all bad news.
While there will definitely be a sharp rise in the price of wood fuels, the prices of petrol, diesel, and electricity will also rise. And their price increase will be even sharper. As wood fuel is positioned as the heating market's Giffen good, the laws of economics dictate that demand for it will only increase as its price increases.
So you’re likely to see increased sales, rather than decreased sales.
What Is a Giffen good?
Explained simply, Giffen goods are a class of inferior goods without similarly priced substitutes.
Let's imagine a household that can spend €300 on heating per month. It uses both inexpensive wood fuels and convenient (yet a lot more expensive) electric heat. Under normal circumstances, the household would spend €150 per month on fuelwood and €150 on electric heat.
Now, when the price of wood fuel increases, the household cannot substitute it with electricity to get the same amount of heat as become. This is because electricity is already more expensive than wood fuels. So their only real option is to reduce their dependency on electric heat to €100 and use the remaining funds to buy €200 worth of wood fuel. This is the only way for them to stick to their €300 budget.
Looking for the best wholesale wood fuel prices? Contact us and we’ll help you find the best wholesale wood fuel solution for your business.