Drought in Germany and Europe are driving up costs

Extreme weather events and droughts in Germany and Europe are contributing to rising costs, according to recent research. Torsten Schmidt, an economist at the RWI – Leibniz Institute for Economic Research, stated that reduced cargo capacity on the Rhine river would significantly increase transport costs per metric ton. These higher costs would be passed on to consumers, particularly impacting energy sources like diesel and heating oil, which are primarily transported via water.

The Food and Agriculture Organization of the United Nations (FAO) reported that global food prices are currently about 30% higher than in 2020, with meat and oilseeds seeing sharp increases since then. Various factors, including climate change, supply bottlenecks, and geopolitical tensions like the US-Iran and Russia-Ukraine wars, are affecting inflation rates.

A study by the European Central Bank (ECB) and five European research institutes published in July 2025 warned that escalating inflation could become a challenge for central banks striving to maintain price stability. The ECB's study suggested that frequent extreme weather events could make food prices less stable domestically and globally, potentially leading to persistent upward pressures on inflation, especially from extreme summer temperatures.

Germany's inflation rate in June 2025 was slightly below the EU average at 2.4%, with high transport costs at 5.3% driving inflation. Experts recommend maintaining higher inventory levels to mitigate supply chain risks, as highlighted by Holger Schulz of the German Savings Banks Association.