The sharp rise in international oil and natural gas prices, largely as a result of geopolitical tensions in the Middle East, has brought energy back to the center of inflationary pressures in Greece.
As Alpha Bank points out in its regular analysis of the Greek economy, the significant presence of oil in final energy consumption and of natural gas in electricity generation keeps the Greek economy exposed to changes in their international prices. The related pressures are already reflected in the energy component of inflation, with secondary effects remaining, for the time being, limited.
At the same time, the transformation of the domestic electricity system is underway, with the main features being the increasing penetration of Renewable Energy Sources (RES) in electricity generation and the gradual strengthening of the country's export position in electricity. In this light, the recent state interventions seek, on the one hand, to mitigate in the short term the effects of the increased energy cost on economic activity and, on the other hand, to strengthen in the long term the energy resilience of the Greek economy.
Rise in energy prices, inflationary pressures and the structure of energy consumption
The military operations between the US/Israel and Iran at the end of February caused a sharp rise in international energy prices. The price of Brent crude oil rose from about 72 dollars/barrel to over 100 dollars/barrel during March, while correspondingly the price of natural gas increased from about 32 euros/megawatt-hour to levels above 60 euros/megawatt-hour. Their prices have since remained high and, despite fluctuations, remain significantly higher than the levels before the start of the February crisis.
This increase had a direct effect on the energy component of inflation and, by extension, on the general price level. Specifically, in the period March-September, average inflation in Greece, as measured by the Harmonised Index of Consumer Prices (HICP), stood at 4% on an annual basis (Eurozone: 3.1%) compared with 3% in the first two months of the year, with the price index of the energy component increasing by 16.7% (Eurozone: 11.2%) compared with a decrease of 3.9% in the first two months.
It is worth mentioning that, based on Eurostat data, the consumer price index for liquid household fuels, which mainly concerns heating oil, recorded an average annual increase of more than 48% in the six-month period March-August, while the corresponding diesel price index increased by 24% in the same period. It is noted, however, that the course of the individual components of inflation, such as food and non-energy goods, is consistent with limited, so far, secondary effects.
At the same time, oil holds a dominant position in the structure of the Greek economy's energy consumption, compared with the other member states of the European Union (EU-27), making it more exposed to fluctuations in its prices. More specifically, oil and petroleum products account for about 53% of final energy consumption (for energy use), a percentage that is the second highest in the EU-27, after that of Cyprus (56%) and significantly higher than the European average (37%). In final energy consumption in Greece, after oil, electricity follows (27%), RES and biofuels (11%) and natural gas (7%).
Electricity generation mix and electricity balance
Although it has a relatively limited share in final energy consumption, natural gas continues to be one of the main sources of electricity generation. Specifically, the share of this fossil fuel in electricity generation has ranged in recent years between 33%-44%, while in the first seven months of 2026 it stood at 39%.
The significant change in the electricity generation mix taking place in recent years is related to the large increase in the share of RES, with a parallel decline primarily in coal (mainly lignite) and manufactured gases and, to a lesser extent, oil. More specifically, since 2020 the share of RES in electricity generation has consistently exceeded 40% (compared with 35% in 2019), while in the first seven months of the year it stood at 52%. By contrast, the share of coal and manufactured gases has been drastically reduced from 22% in 2019 to just 5% in the first seven months of the year.
Alongside the changes in the electricity generation mix, a remarkable improvement is also being recorded in the electricity balance. After a multi-year period during which Greece was a net importer of electricity, the balance turned positive in 2024 (0.3 TWh), for the first time since 2000, while the country's export position was further strengthened in 2025 (3 TWh) and in the first seven months of 2026 (5.5 TWh). Greece's transition from a net importer to a net exporter of electricity contributes, among other things, to reducing the country's trade balance deficit.
Uncertainty and state interventions
The course of international energy prices is characterized by increased uncertainty and is directly intertwined with the evolution of geopolitical tensions and the restoration of energy flows from the Middle East. Addressing the effects of the disruption in the energy sector is also at the center of European economic policy, with the European Commission, through the AccelerateEU action plan, aiming on the one hand at short-term support measures for households and businesses and on the other at accelerating investments in clean energy and infrastructure, with the goal of reducing dependence on imported fossil fuels.
Government interventions in Greece are moving in the same direction, combining immediate support measures to mitigate the effects of the increased energy cost on disposable income and economic activity with investments aimed at strengthening energy resilience and reducing electricity costs over the medium to long term.
The first category includes subsidies for diesel fuel, for fuels through a digital card (Fuel Pass) and for fertilizers for farmers, compensation for ferry companies for reduced ticket charges for specific social groups, as well as income support interventions, such as the extraordinary allowance per child, the expansion of the rent refund and the increase both in the financial support for pensioners and in the maximum number of installments for accumulated debts.
The second category of measures, with a medium-term horizon, includes investments for the storage of energy from RES, the upgrading of electricity networks and island interconnections, the energy upgrading of homes, businesses and public buildings, as well as the promotion of clean energy technologies at the level of the final consumer, such as heat pumps, solar water heaters and photovoltaic systems.