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Extract from our "Europe’s Gas Strategy: So Far So Good" research paper, published on the 6th April 2023. Register for a free trial* to access the full paper.

A year ago, Russia’s gas embargo seemed like an insurmountable challenge for Europe. Somehow managing to avoid a recession, Europe seems to have achieved extraordinary progress so far in coping with this exceptional shock, albeit with very large financial costs in 2022 and high inflation. In 2022, the EU spent some EUR 400 bln to import natural gas, up from about EUR 120 billion in 2021. Large investments have been made in energy efficiency and diversification, which should yield concrete results from 2025. For the next winter (2023/24), another severe gas crunch is a risk; but after a year of planning and investments, such a scenario can be avoided or ameliorated by better management of supply from global sources. Beyond that, there ought to be more stability in gas supplies to Europe. In this note, we take a QnA approach to update our understanding of the situation. The main upshot is that the inflation profile in Europe lags that of the US by about four months, due mainly to the price profile of natural gas prices. A successful re-mapping of gas supplies should lead to greater structural stability in inflation.

The full report contains the following sections:

  • What have the European countries done in response to the Russian gas embargo?
  • Did Europe effectively deal with the first winter without Russian gas?
  • How much did the remedial actions cost?
  • How did Europe pay for these expenses? Mainly through sovereign bond issuances.
  • Which countries benefited from the increase in Europe’s demand for LNG?
  • Will Europe face a similar problem next winter or have they found a permanent solution?
  • Bottom line

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