In a recent report, ECB acknowledges sanctions on Russian goods and assets have caused the surge in inflation rates all over Europe. “The recent inflation surge in the euro area was significantly influenced by energy prices, particularly gas following Russia’s invasion of Ukraine in February 2022. (…) In comparison to oil price shocks, gas price shocks have approximately one-third smaller pass-through to headline inflation. Country-specific results indicate gas price increases matter more for German, Spanish and Italian inflation than for French inflation, hinging on the reliance on energy commodities in consumption, production, and different electricity prices regulation.
Consistent with gas becoming a prominent energy commodity in the euro area, including time-variation through a time-varying parameter BVAR demonstrates a substantially larger impact of gas price shocks on HICP inflation in recent years”.
While EU’s import of LNG from russia has risen in 2024 to record level, Ukraine closes the tap of Russian oil pipelines to Hungary and Slovakia, who ask the EU Commission for help. The EC, in turn, dismiss the fears and affirms transit is fine.
If the EC does not play a move as the two countries are asking for, this could be the final stroke on the European economy and its energy needs. Next winter will be very cold, not only for Ukrainian households…
