Europe’s output losses proved limited following the 2022 cutoff of Russian gas flows, yet inflation rose sharply. This column uses weather variation and gas-market events to distinguish gas-demand shocks from interruptions to current flows and news about future availability. A deterioration in expected future gas availability has a larger and more persistent effect on consumer prices than an interruption to current flows, even without an immediate physical shortage. Furthermore, lower gas use can coincide with weaker spending and production. Energy-security policy must make future availability credible by ensuring that alternative supplies and stored gas can be accessed under stress.
Major disruptions to gas flows through the Strait of Hormuz have returned energy security to the European policy agenda and revived concerns about future gas availability and supply security (IEA 2026, European Commission 2026). Europe enters this episode better prepared than in 2022, with lower fossil-fuel dependence, improved energy efficiency, and faster renewable deployment. Yet the macroeconomic consequences still depend on how long the disruption lasts (Verwey and Orsini 2026). The policy question is not only how much gas fails to arrive today, but also whether markets expect supply to remain available tomorrow.
The 2022 cutoff of Russian gas shows why this distinction matters. Europe replaced a substantial share of the lost gas through increased liquefied natural gas (LNG) imports (Emiliozzi et al. 2024), and aggregate activity held up better than many had feared. Yet gas prices and inflation rose sharply. Why can energy-supply risk generate persistent inflation even when physical adjustment limits aggregate output losses? Observed gas prices and physical flows alone do not reveal a disruption’s inflationary consequences. The same gas-price increase may reflect stronger demand, an interruption to current flows, or news that future supply has become less secure.
In a recent study (Colombo and Toni 2025), we exploit two sources of plausibly exogenous variation in gas markets. Temperature deviations from seasonal norms shift heating demand, while unexpected movements in gas futures around clearly dated events capture supply news. We retain events only when they can be linked to gas supply rather than broader macroeconomic or energy-market developments.
We distinguish two supply shocks. Outages or pipeline disruptions identify interruptions to current flows. Announcements that change expected future availability, without necessarily changing current deliveries, identify supply-security news. Figure 1 plots the resulting euro area supply instruments. This identification strategy allows us to trace the effects of the different shocks separately over time and to estimate the short-run structural elasticities of gas demand and supply.
Figure 1 Euro area supply instruments
These elasticities are central inputs into model-based assessments of the economic cost of gas disruptions (Moll et al. 2023). We find that gas demand is less price-responsive than supply in both the euro area and the US. Because a supply-side disturbance forces adjustment along the less price-responsive demand curve, it generates a relatively large gas-price movement even when the immediate adjustment in quantities is limited.
By separating current-flow disruptions from future-supply news, we can compare their macroeconomic effects. Figure 2 traces the responses to shocks normalised to raise the real gas price by 10% on impact. Supply-security news generates larger and more persistent consumer-price effects than a realised flow disruption.
Crucially, supply-security news does not reduce measured gas supply on impact, and consumption changes little. It also raises inventories and financial-market volatility, and both remain elevated. This pattern points to precautionary inventory accumulation and heightened uncertainty about future availability. The interpretation parallels the role of inventory demand in transmitting expectations about future scarcity to current oil prices (Kilian and Murphy 2014). The gas-price response is also more persistent: the effect of a realised flow disruption fades, while supply-security news keeps gas prices elevated for longer. The macroeconomic consequences differ accordingly. A realised flow disruption generates real effects, but they are short-lived: industrial production falls briefly, while the shock’s implied consumer-price pass-through is small, at around 1%. Supply-security news instead leaves industrial production close to baseline, while the implied pass-through rises from around 2% on impact to roughly 5% after about one year.
The US provides a useful market-structure benchmark for the European results: domestic production makes it far less reliant on imports than Europe. We find that realised flow disruptions have limited consumer-price pass-through in both markets: US industrial production is essentially unaffected, while the European decline is short-lived. What distinguishes Europe is the large, persistent consumer-price response to news about future availability, consistent with its exposure to global gas markets.
Figure 2 The impact of realised flow disruptions and supply-security news
Aggregate resilience can mask costly adjustment when gas is important and hard to replace. Germany was central to the debate over whether substitution and reallocation could contain the costs of a Russian gas cutoff (Bachmann et al. 2022). Before the crisis, gas-import expenditure was roughly 0.8% of nominal gross national expenditure (GNE) in Germany, versus 0.5% for the euro area.
Lower gas use alone cannot distinguish successful substitution from economic contraction. Gas use may fall through fuel switching or efficiency while output is sustained, or because spending and production contract. Fuel switching can itself carry environmental costs: by raising gas prices, realised flow disruptions shift power generation away from gas towards more carbon-intensive fuels and raise emissions in the short run.
To distinguish these adjustment paths, Figure 3 compares the responses of gas use, gross national expenditure, investment, and industrial production in Germany and the euro area following a combined supply shock that pools flow disruptions and supply-security news. In Germany, the shock lowers gas use, gross national expenditure, and investment, and leaves industrial production persistently below baseline. The corresponding euro area responses are more muted and short-lived. Household consumption also falls in our estimates, although that response is less precise. Together, these results show that physical gas adjustment can coexist with spending and production losses: higher energy costs erode purchasing power, weaken aggregate demand, and prolong the decline in activity (Auclert et al. 2023).
Figure 3 Real effects of a gas supply shock in Germany and the euro area
Our findings suggest several practical policy implications. News that future gas supply is less secure can increase precautionary demand even when current deliveries are unchanged. Our evidence is consistent with this mechanism: supply-security news raises inventories and market volatility, keeps gas prices elevated, and generates persistent consumer-price effects. The policy objective is therefore not to suppress private storage, but to make future supply more credible. This means securing alternative supplies that remain reliable beyond the immediate disruption and clearly communicating how future gas needs will be met. Energy-security policy should be judged not simply by whether lost gas has been replaced today, but by whether households, firms, and markets have credible reasons to expect supply to remain available tomorrow.
This distinction also matters for monetary policy. The precautionary response triggered by supply-security news can sustain inflation even without an immediate physical shortage: its consumer-price effect is persistent, whereas realised flow disruptions have limited pass-through. Central banks should therefore distinguish the two when assessing whether to look through a gas-price increase, rather than assume its inflationary effects will be temporary. This complements evidence that gas-supply shocks have more persistent core-price effects than oil shocks (Alessandri and Gazzani 2023).
Finally, the environmental effects depend on both relative fuel prices and the horizon of adjustment. Realised flow disruptions raise emissions in the short run by shifting power generation towards coal and oil. Supply-security news instead generates more persistent gas-price increases and lower emissions at longer horizons, consistent with longer-term adjustment towards cleaner energy. A gas-specific price increase is therefore not equivalent to a broad carbon price. Policies aimed at reducing gas dependence should also limit the incentive to replace gas with more carbon-intensive fuels.
Source : VOXeu
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