The rise in natural gas prices following the outbreak of the conflict in Ukraine and the introduction of Western sanctions against Russia led to an increase in inflation in the Eurozone. According to the data of the European Central Bank, a 10 percent increase in the price of gas leads to a price increase of about 0.1 percentage point, which contributes to a persistent inflationary effect for more than one year.
Natural gas price jumps are increasingly affecting inflation in the Eurozone, although so far this impact is not as significant as the impact of oil price fluctuations, Reuters reports, citing a study by the European Central Bank.
Natural gas prices have risen sharply following the outbreak of conflict in Ukraine in February 2022 and the imposition of Western sanctions on Russia. This pushed eurozone inflation into double digits by the fall of that year and led to the ECB’s sharpest rate hike cycle yet.
According to the study, gas has a third less impact on inflation than oil, but “it plays a more important role in production than in the consumer basket, so indirect effects prevail”.
Therefore, a 10 percent increase in the price of gas leads to an increase in prices of approximately 0.1 percentage point, and this leads to a permanent inflationary effect for more than one year.
However, the growth in gas prices between the beginning of 2022 and the peak reached in August 2022 was close to 200 percent, which means that inflation increased by about 2 percentage points, it was reported, Reuters writes.
