The European industries most under threat from the gas crisis

Russia’s shutdown of natural gas flows to Europe has resulted in skyrocketing regional prices. This has contributed to a significant downgrade of our global and national economic growth forecasts and will impact European industry negatively. Energy-intensive sectors such as metals, refining, building materials, and chemicals are heavily exposed: non-ferrous metals use approximately four times as much electricity and gas per unit of gross value-added output as the manufacturing sector as a whole, while refining, iron & steel, and non-metallic minerals use just over double.

What you will learn:

• Using data now available from our Global Industry Service, we can measure energy intensity –defined as energy use per unit of output – by sector and fuel type. Industries that directly use gas as a key input for production are particularly at risk from higher gas prices.
• High gas prices can also pass through to industrial consumers via electricity prices due to the use of gas as a marginal fuel, the fuel that balances supply and demand for electricity, in electricity markets and the marginal pricing structure used in most European economies. The sectors for whom electricity is a key input generally include the same industries listed above as gas intensive as well as wood and paper manufacturing.
• The possibility that gas rationing will be imposed this winter remains a key risk. Industry is likely to bear the brunt of such policies, with restrictions most easily imposed on the biggest gas consumers in absolute – rather than relative – terms. The sectors most at risk include chemicals, non-metallic minerals, metals, food, and fuel refining.