Europe's gas consumption has fallen by 10% to 15% compared with the decade before Russia's invasion of Ukraine as high prices enforce sharp cuts, especially by energy-intensive industries.
Total consumption in the European Union's seven-largest gas-consuming countries amounted to 5.0 million terajoules in the first five months of 2023, according to Eurostat data.
This was down from 5.6 million terajoules in the same period in 2022 and an average of 5.7 million in the ten years to 2021 ("Supply, consumption and transformation of gas", Eurostat, July 6, 2023).
Total use was down by 12% to 15% every month, except April, which was unusually cold, when it was still 7% lower.
Chartbook: Europe gas consumption
By May 2023, prompt gas prices had fallen by 85% from their August 2022 peak as panic-buying for storage ended and a mild winter left Europe with record gas stocks at the end of winter.
But prices were still up by 35% compared with the average for 2018-2021, squeezing margins for users in steelmaking, smelting, cement, ceramics, glass-making, fertilizers, petrochemicals and horticulture.
In response, many of the most energy-intensive consumers closed plants or put them on short-time during the winter of 2022/23 to reduce expenditure.
Some capacity has yet to re-open fully because long-term gas prices are too high to make resuming operations profitable.
The most energy-intensive users need uninterrupted supplies and hedge most of their costs forward to lock in profit margins.
But futures prices for deliveries in 2024 have averaged 52 euros per megawatt-hour so far in July 2023, more than three times the forward average of 17 euros between 2018 and 2021.
In the big four economies of Germany, France, Spain and Italy, manufacturing output in the three months between March and May was still below the corresponding level in 2019, before the pandemic and the gas crisis.
Europe averted gas shortages during winter 2022/23 but at the cost of significant de-industrialisation, which will be hard to reverse unless prices fall significantly.
Related columns:
- Europe’s gas storage space is filling too fast (July 6, 2023)
- Europe’s gas prices stabilise as storage additions slow (June 8, 2023)
- Europe's extraordinary good fortune with winter weather (April 18, 2023)
- Europe only has space for a small gas refill in 2023 (April 14, 2023)
John Kemp is a Reuters market analyst. The views expressed are his own
