How gas prices affect inflation: lessons from the European energy crisis

High gas prices were on everyone’s minds when the European energy crisis caused an unprecedented rise in inflation. Based on a recent working paper, we explore the drivers of gas prices during the recent energy crisis and discuss how different types of gas shocks transmit to inflation in the euro area. We find that a combination of drivers contributed to the gas market rally, with a rebound in demand driving the initial increase after the Covid-19 lockdowns, and supply-side disruptions taking over afterwards – particularly when Russia invaded Ukraine. We show that different types of gas price shocks have different […]