What guidance can be given on how inflation will develop by studying the impact of energy prices in the past? That energy prices are rising more rapidly than the CPIF, that is, the relative price of energy is increasing, is no new phenomenon in Sweden. As can be seen from figure 1 , they have increased considerably more than the average of other prices in the consumer basket in recent decades, partly as a result of the introduction of, and increases in, energy and climate taxes.

During the 2000s, energy prices in the CPIF have increased by an average of 3.9 per cent per year, while the CPIF excluding energy has increased by 1.4 per cent. Inflation measured in terms of the CPI or the CPIF has nevertheless not been particularly high, 1.6 per cent on average. The fact that energy prices have risen faster than other prices has thus not given rise to difficulties in keeping down inflation.^[10] Konradt and Weder di Mauro (2021) study the effects on inflation of a carbon tax in a number of countries in Europe and three provinces in Canada and find that it has not been inflationary. If anything, inflation has tended to be below the target of 2 per cent. However, as shown in Figure 1, energy prices have varied greatly. This has also contributed to fluctuations in CPIF inflation.

Figure 1. CPIF, CPIF excluding energy and energy prices in the CPIF Index 01 January 1987 = 100

Energy-saving technological development a continuous process

One of the explanations for why the faster rising energy prices have not had a major impact on inflation is that the weight given to energy in the CPI basket has remained relatively constant at 7-9 per cent (see figure 2). The cost of the average consumer’s energy consumption has thus not increased in relation to the cost of other products – it does not constitute a greater share of the consumption basket, despite the relative price of energy having more than doubled.^[11] Since 1987, energy prices have increased by more than 2.5 per cent on average per year (but also varied greatly), while the CPIF excluding energy has increased by 2.1 per cent.

Figure 2. Energy weights in the CPI Per cent

One explanation for this is that producers and consumers are constantly striving to produce and buy products and technology that save on the increasingly expensive energy, such as ground-source heating and fuel-efficient cars, as this has been profitable for both parties. Energy-saving technological advances are thus a continuously ongoing process.