The lethal impact of rising energy prices

Many of us are all too familiar with the grimace we make when we open our monthly utility bills. The soaring cost of energy is a burden we all bear, often grudgingly slashing our energy use or stretching our budget thin to cover the exorbitant costs. But have you ever stopped to consider that high energy prices may not just be an annoyance, but a literal matter of life and death? The evidence paints a chilling picture.

Economists have delved into the cold realities of energy costs, investigating the link between price spikes and mortality rates. One such study was conducted by the Economist Magazine last month, focusing on European mortality rates last winter and comparing them to the figures from 2015-2019. According to the study, there were 149,000 excess European deaths last winter. At the same time, prices of electricity were up 69% and gas was up 145% compared to two years prior. No doubt Russia’s war in Ukraine, combined with tight restrictions on European energy supply, contributed to the price spike.

The implications are startling: a rise of merely €0.10 per kwh was associated with an increase in a country’s weekly mortality rate of approximately 2.2%. Shockingly, 68,000 deaths were linked to higher energy prices. To put that into perspective, the study attributed 59,700 excess deaths to the ongoing Covid-19 pandemic during the same time period.

The Economist suggests expensive energy discourages people from adequately heating their homes, thereby increasing the risk of cardiac and respiratory problems due to prolonged exposure to cold conditions. This should not surprise us, given a regular reported finding in statistical research is that “warmer is healthier,” meaning higher temperatures are associated with lower death rates.

The Economist study helps to demonstrate why the impact of high energy prices is cause for concern. But we also need to look at the cost of regulation, which impacts household budgets indirectly.  Regulations can contribute to an increased death toll by imposing costs that eat into disposable income. As spending power dwindles, so too does the potential for spending on risk management and health-related expenses. This argument, known as the “wealthier is healthier” hypothesis, complements the idea that warmer is healthier. In fact, spending on energy is potentially a critical channel that can explain the frequently observed relationship between financial health and physical health, including mortality.

Two of my own research papers include estimates of the level of cost sufficient to produce one expected death in society. Depending on the study method, my coauthors and I found that for about every $40 to $115 million in costs imposed on American society, we can predict one death will occur by virtue of individuals being made poorer.

When we take a step back and look at the regulatory system as a whole, the death toll from the regulatory state is not trivial. My CEI colleague Wayne Crews has estimated that the total cost of federal regulations was just under $2.0 trillion in 2022. Other studies put the cost even higher, in the vicinity of $4 trillion, or even as high as $40 trillion, annually. If we take just the two low-end estimates of cost, at $80 million per expected death there are roughly 25,000 to 50,000 deaths annually that can be attributed to federal regulations (and this doesn’t count state and local regulations).

Those numbers may sound staggering, but not when compared to the estimated 68,000 deaths in Europe from high electricity prices during a single winter, or in the context of the approximately 3 million deaths that occur every year in the United States. This suggests regulations may explain about 0.8 to 1.7 percent of annual deaths. Furthermore, regulations probably save some lives too, which means the net death toll is somewhat lower than the gross toll.

It is high time that we understand and address the serious ramifications of high energy prices and regulatory costs, as they may have lethal consequences. With the mounting evidence, it becomes clear that the price we pay for energy might just be higher than what shows up on our utility bills.