Gas price shock will hit Czechia harder than western Europe

The shock of a possible sharp rise in gas prices will affect individual European Union member states differently. It will be greater in central and eastern Europe, including Czechia. Countries that obtain gas from a variety of sources and have a high share of renewable and nuclear energy will have an advantage. According to APA, this follows from a recent simulation carried out as part of a project by the European Spatial Planning Observation Network (ESPON).

According to the ESPON analysis, the impact of a gas price shock on inflation should be less severe in western, northern and southern Europe, including Germany, Austria, France, Scandinavia, as well as Spain, Portugal and Italy. By contrast, the member states in the eastern part of the bloc would be hit hardest, such as Poland, the Czech Republic, Slovakia, Hungary, the Baltic states and parts of Romania.

"Countries with higher energy efficiency, more diversified energy systems and lower dependence on fossil fuel imports are better protected against such shocks," according to APA, the project, coordinated by Vienna-based research institute CESAR (Centre of Economic Scenario Analysis and Research), said in a press release.

For central and eastern European countries, the authors of the analysis point in particular to their high dependence on fossil fuels. Combined with limited budgetary flexibility, this will worsen the negative effects of a sharp increase in natural gas prices, they said.

Among individual economic sectors, the shock caused by gas prices would hit energy-intensive businesses involved in the production of metals, cement and glass the hardest. Refineries and the chemical industry would also be affected. Within the energy sector, high gas prices would primarily be reflected in higher electricity prices, as gas-fired power plants are used to varying degrees for electricity generation in EU countries.