Demand response to high gas prices in Europe in 2021 and early 2022
This article examines the demand response to the high gas prices in the European gas market, reviewing the main factors in 2021 and in the first four months of 2022.
It concludes that, in 2021, high gas prices appear to have had a limited impact on demand, while other factors played a more important role and contributed to limiting most price-response, especially in Q4 when gas prices reached (then) record-levels. However, since the beginning of 2022, gas demand response seems to be happening more broadly: in heating with some -as yet limited- change in consumer behaviour, in the industrial sector with apparent switching to other fuels and in the electricity generation sector with gas to coal switching in the mix.
For the rest of 2022, what happens in the power sector is expected to be a major driver, with some possible coal to gas switching as a result of higher coal prices and the ban on Russian coal imports from August, the (so-far) limited availability of hydro and, most importantly, the lower than previously expected availability of French nuclear capacity all likely to increase the call on gas-fired plants for the rest of the year.