The 2022 gas price shock: did it trigger or bring to light the restructuring of European industry?

1 Russian gas, a long-standing source of support for Europe’s energy-intensive industry

A defining energy compromise, particularly in certain European countries

With an industrial sector built on coal, Europe gradually turned to primary energy sources that were scarce on its soil—first oil, then natural gas—while developing electricity production. These energy sources, which are easier to transport and store, better suited to the automation and modernisation of industrial processes, and generally more energy efficient, have gradually replaced coal in most sectors. From the 1970s onwards, several Central and Eastern European countries, such as Austria and Germany, turned to Soviet (and later Russian) gas. Long-term contracts, dedicated infrastructure (notably the Yamal and Nord Stream gas pipelines) and moderate prices secured a long-term energy supply for their industries.

This model enabled European industry to benefit from competitive gas prices, which were higher than in the United States, a hydrocarbon producer, but slightly lower than in Asia. Indeed, during the 2010s, low and stable natural gas prices provided lasting support for industrial production. This advantage came at the cost of heavy dependence on Russia, which in 2021 supplied nearly 155 billion cubic metres of gas to the European Union, or about 40% of its annual consumption (International Energy Agency – IEA, 2022).

An energy intensive and geographically concentrated industrial base

This favourable energy framework supported the development of particularly energy intensive industries, especially those that consume natural gas. These include metal and metal products, chemicals, glass, paper, refining and coking, wood processing, and agri-food. For these activities, intermediate consumption of gas and electricity accounted for at least 5% of the value added produced in 2018. This percentage is the threshold used in this article to define sectors as energy intensive, in line with similar studies (Simon, 2022). In these sectors, gas plays a dual role: it is both a source of energy and a production input, particularly in the chemical and petrochemical industries. This duality makes any substitution complex and often costly.

Prior to the war in Ukraine, the industrial geography of Europe largely coincided with that of Russian gas imports. …