The Threat to Supply Chains from Rising Gas Prices

Due to the Russian invasion of Ukraine, the European Union is currently experiencing a massive increase in gas prices. This threatens the resilience of many supply chains. An analysis by the Halle Institute for Economic Research (IWH) now shows that a small group of just 300 products causes a large part of almost 90% of the gas consumption of German industry during their manufacture. The five products with the highest gas consumption per euro of sales belong to the basic chemical industry. The analysis also shows that rising gas prices mainly lead to production cutbacks in gas-intensive products that can easily be replaced by imports. Therefore, despite domestic production outages, no significant disruptions to the supply chains are to be expected. “German industry can save a lot of gas with a small drop in sales if gas-intensive products are no longer manufactured in-house but imported,” says Steffen Müller, one of the authors of the analysis.