Oil and Gas Rally Raises Industrial Costs and Forces Factories to Revise Margins

The price of Brent crude has exceeded $95 per barrel for the first time in eighteen months, while natural gas on the European market is trading 40% above the lows of early this year. This rally, driven by geopolitical tensions, OPEC+ production cuts, and stronger-than-expected Asian demand, is directly hitting the industrial sectors most dependent on energy.

Cement, steel, chemicals, paper and ceramics factories, as well as automotive and capital goods plants, are seeing their variable costs soar. In many cases, fixed-price energy supply contracts have expired and new renewals reflect much higher prices, eroding operational profitability.

Manufacturing Companies React with Caution

Large European industrial groups have begun to revise down their profit guidance for the second half of 2026. Companies such as ArcelorMittal, BASF and Saint-Gobain have warned investors that EBIT margins could shrink by one to three percentage points if energy prices remain at current levels.

Some factories have opted to reduce shifts or halt production lines during peak electricity cost hours, especially in countries where electricity prices are indexed to natural gas. This response is leading to lower capacity utilization and, in some cases, delivery delays to customers.

Passing Through to Final Prices: A Risky Decision

Companies now face the dilemma of absorbing higher costs or passing them on to selling prices. In a context of moderate demand and price-sensitive consumers, raising prices could reduce sales volumes and lose market share to competitors with better energy hedges or located in regions with cheaper energy.

However, not passing through costs would mean accepting negative margins on some products. Many companies are applying selective increases on product lines where competition is weaker or where customers have fewer alternatives, while keeping prices competitive in the most contested segments.

Energy-Intensive Industry Calls for Support Measures

Associations of large electricity consumers have asked national governments and the European Commission to activate compensation mechanisms for indirect CO₂ costs and to reconsider price caps on gas. They also call for temporarily reducing regulated tolls and charges to prevent plant relocations.

Germany, France and Spain have already announced partial aid for energy-intensive industries, but companies consider them insufficient. Some aluminum and fertilizer plants have already announced temporary shutdowns or production cuts, which could affect European supply chains.

Impact on Investment and Global Competitiveness

The rise in energy costs is altering many companies' investment plans. Capacity expansion projects or the installation of new production lines are being postponed or relocated to regions with more stable and cheaper energy, such as the United States or the Persian Gulf.

Analysts warn that Europe risks losing industrial competitiveness if this trend continues. Investment in energy efficiency and self-consumption renewables has accelerated, but installation timelines and capital costs remain major obstacles for SMEs.

Outlook for the Coming Quarters

Commodity experts do not expect a significant drop in oil and gas prices in the short term. Tensions in the Middle East, reduced Russian supply, and China's industrial recovery keep upward support. Futures for winter 2026 already discount prices 25% above current levels.

Companies must therefore integrate the scenario of expensive energy into their business models and accelerate investments in energy savings and flexibility. Investors, for their part, are closely watching margin trends and companies' ability to pass on costs without losing market share. The coming months will be decisive in determining which sectors and which companies successfully navigate this new energy storm.