 Natural gas dependence and risks to activity in the euro areaVanessa Gunnella (), Valerie Jarvis, Richard Morris and Mate Toth Economic Bulletin Boxes, 2022, vol. 1 Abstract: This box reviews the dependence of the euro area on natural gas and provides an assessment of the impact of gas price increases and a possible rationing shock on activity. Natural gas is the second most important primary energy resource in the euro area and the most important in the manufacturing sector. More than 90% of the natural gas consumed in the euro area is imported. With indirect use in the early stages of production accounting for more than two-thirds of gas consumption, supply chain linkages significantly amplify the reaction of goods producers and services providers to gas price increases. An accounting framework based on input-output tables shows that the direct and indirect impact of a hypothetical 10% gas rationing shock would reduce euro area gross value added by about 0.7%. Illustrative simulations based on the ongoing surge in oil and gas prices and futures suggest that, by the end of 2022, euro area real GDP may be around 0.2% lower than its counterfactual level, with the effect likely peaking in the first quarter of this year. JEL Classification: D45, D57, Q43 Keywords: activity; natural gas; prices; rationing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2022:0001:4 Access Statistics for this article More articles in Economic Bulletin Boxes from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC. |
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