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Jakob Feveile Adolfsen

21 June 2022
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 4, 2022
Details
Abstract
Record-high energy price increases at the end of 2021 and beginning of 2022 put significant pressures on the purchasing power of consumers. These increases followed a marked decline in energy prices at the onset of the coronavirus (COVID-19) pandemic. While the initial increase in energy prices from the summer of 2020 was mainly driven by the recovery in energy demand following the easing of lockdown measures after the first wave of the pandemic, the subsequent price rally during 2021 was also significantly affected by supply-side issues. This development was aggravated in early 2022 by the Russian invasion of Ukraine. The increase in European gas prices since the summer of 2021 has been particularly sharp, reflecting a combination of supply and demand factors that left European gas inventories at historically low levels ahead of the winter season and the gas market vulnerable to supply and demand uncertainty, including from escalating geopolitical tensions. As a result, consumer gas prices and consumer electricity prices (driven by gas prices) played an increasingly important role in developments in HICP energy and were also accompanied by unprecedented cross-country heterogeneity in energy price developments.
JEL Code
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
L90 : Industrial Organization→Industry Studies: Transportation and Utilities→General
21 June 2022
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 4, 2022
Details
Abstract
This box provides an overview of the impact that the war in Ukraine has had on euro area energy markets. Energy commodity and electricity prices spiked in the immediate aftermath of Russia’s invasion of Ukraine and have been highly volatile ever since. Russia supplies a considerable amount of energy to the euro area, particularly gas. The European Union introduced economic sanctions targeting the Russian energy industry, most notably the coal and oil sectors, while steps are also being taken towards becoming independent of Russian gas. After the initial price spikes, energy commodity prices moderated, owing partly to the EU’s sanctions and also helped by other policy initiatives such as historically large releases of strategic oil reserves. Higher energy commodity prices intensified the pressure on euro area consumer prices in February and March 2022, while some of this pressure was alleviated in April and May as a result of government measures.
JEL Code
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
N44 : Economic History→Government, War, Law, International Relations, and Regulation→Europe: 1913?