The importance of the global gas market for EU
In this paper Albrizio et al. assess the supply-side effects on European Union (EU) economic activity if Russian gas imports were to suddenly cease. In particular, they evaluate whether access to the global liquefied natural gas (LNG) market can buffer the economic impact of a Russian gas shut-off on Europe. The authors use an open-economy, multi-sector general equilibrium model where global liquefied natural gas quantities fully adjust to prices and markets clear. Their analysis is based on first-round, largely supply-side based approximation of the output impacts. They find:
Properly accounting for the global LNG market reduces the adverse economic impact of a cessation of Russian gas exports on the EU by a factor of five, but with significant global spillovers. Even with access to the global LNG market, gas prices in the EU would still rise about 100 percent.
Market Size and Supply Disruptions: Sharing the Pain of a Potential Russian Gas Shut-off to the European Union
Authors: Silvia Albrizio, John Bluedorn, Christoffer Koch, Andrea Pescatori, Martin Stuermer
From: IMF
On Germany
A new paper by Bachmann et al. makes a few interesting points on how a freeze in imported gas from Russia could impact Germany:
- A complete loss of Russian gas supplies will force Germany to reduce its gas demand by around 25% (equivalent to 210 TWh) by the end of the coming heating period (April 2023).
- There is no threat of mass poverty or popular uprisings in the event of a halt to Russian gas imports. The economy will face production losses of a magnitude that Germany has already managed in the past when it had to face economic shocks.
- While closer cooperation with European partners could have mitigated the necessary reduction in gas demand in Germany, there is still a risk that national go-it-alone efforts will undermine essential European energy solidarity.
And from Daniel Gross:
Adjusting to a world without Russian gas is of course a major problem for Europe. Yet, although Germany seems more vulnerable because it used to receive a large share of its gas from Russia, this can change quickly. Germany is building new regasification capacity in record time to allow the country to import the quantities of liquefied natural gas needed to fill the gap between lower Russian supplies and domestic demand, which is already falling because of high prices.
How it can be done
Authors: Rüdiger Bachmann, David Baqaee, Christian Bayer, Moritz Kuhn, Andreas Löschel, Ben McWilliams, Benjamin Moll, Andreas Peichl, Karen Pittel, Moritz Schularick, Georg Zachmann
From: University of Notre Dame, University of California, Los Angeles, University of Bonn, Ruhr-University Bochum, Bruegel, LSE, University of Munich, Sciences Po Paris
Russian Gas Cuts Will Not Kill the German Economy
By: Daniel Gross – Centre for European Policy Studies
