Do Managers Care About Energy Prices?

Are energy costs important to decision-makers in Swiss firms? To answer this question, the authors of this research conducted a survey between June and August 2023 among decision-makers in 882 Swiss firms across all industries. What they found is a paradox: Swiss managers care about energy prices (more than half of them consider energy prices as very important or rather important), although the typical energy cost share is very low (about 3% for the median firm).

The energy cost share does matter for some firms. First, some firms are highly exposed to energy prices through a high energy cost share (one out of ten report an energy cost share of 14% or more). Second, the reported importance of energy prices is strongly related to the energy cost share, suggesting that energy prices matter to firms through a direct cost channel for those with a high energy cost share.

Firms were also questioned about their recent energy price changes. Firms typically experienced a large price increase (10% over the past 12 months for the median firm), but some reported a very large increase (one out of ten report an increase of 40% or more). Managers who have experienced a larger increase also reported a higher importance of energy costs, suggesting that the reported importance is related to managers’ recent experience and can evolve quickly. These firms are also more uncertain about future energy price developments. Both the high price increase and the high uncertainty pose a direct threat to these firms’ investment decisions.

Because some firms are highly exposed to energy prices, and the majority of firms care about related prices, this should thus be a concern to policymakers. Since energy price changes are heterogeneous across firms, the promotion of fair-priced energy price insurance could be an attractive policy option.