Gas consumption in Europe during the winter of 2022-23

By Alexander Plekhanov and Joseph Sassoon

As supplies of Russian gas via pipelines dropped by more than 70 percent year-on-year and prices of energy rose sharply, consumption of gas in Europe fell by more than 20 percent during the winter of 2022-23. The impact on overall industrial production was nonetheless relatively mild. This paper decomposes adjustments to the energy shock across European economies. The largest contribution (7 percentage points, on average) came from changes in the structure of industrial production. We further show that the difference in contraction in industrial output between more and less carbon-intensive industries was greater in economies with larger increases in electricity prices for industrial consumers. Warm temperatures during the winter of 2022-23 are estimated to account for 4 pp of the average reduction in gas consumption, weak industrial activity accounts for another 2.7 pp, increased use of renewables (and coal) in electricity generation for 1.1 pp. The unexplained remainder, of around 6 pp, is equivalent to heating buildings by around 1.3 degrees less, on average.