Market Size and Supply Disruptions: Sharing the Pain of a Potential Russian Gas Shut-off to the European Union

By Silvia Albrizio, John C Bluedorn, Christoffer Koch, Andrea Pescatori, Martin Stuermer

July 19, 2022

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Silvia Albrizio, John C Bluedorn, Christoffer Koch, Andrea Pescatori, and Martin Stuermer. Market Size and Supply Disruptions: Sharing the Pain of a Potential Russian Gas Shut-off to the European Union, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We assess the supply-side effects on European Union (EU) economic activity if Russian gas imports were to suddenly cease. Unlike other studies, we account for the global scope of the liquefied natural gas (LNG) market. In the absence of frictions, an open-economy, multi-sector general equilibrium model suggests that the adverse economic impact on the EU shrinks five-fold if integration with the global LNG market is considered. While greater integration provides a buffer for the EU through trade, the flip side is that other LNG importers (such as Japan, South Korea, and Pakistan) see adverse effects from higher prices.

Subject: Consumption, Demand elasticity, Economic sectors, Economic theory, Fuel prices, National accounts, Natural gas sector, Prices, Supply shocks

Keywords: Commodities, Consumption, Demand elasticity, Energy, EU consumption, EU country, EU gas, Europe, Fuel prices, Global, International trade, LNG importer, LNG market, Market size, Natural gas, Natural gas sector, Price effect, Sanctions, Spillovers, Supply disruption, Supply disruptions, Supply shocks, Supply-side effects on European Union

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/143
Stock No:

WPIEA2022143
ISBN:

9798400215223
ISSN:

1018-5941

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