Demand for gas inside Europe is expected to decline at a record pace this year, driven by higher prices, the suspension of Russian exports, and policy measures aimed at avoiding supply shortages this winter. Economies across the region are facing tighter budgets for energy, and households and industries alike are adjusting consumption in response to the elevated cost of gas. The International Energy Agency (IEA) outlined this scenario in its quarterly gas market report, acknowledging substantial uncertainty while revising forecasts downward and signaling a further 4% drop in European gas demand in 2023. This decline follows an anticipated reduction for 2022, which amounts to about 54,000 million cubic meters and translates into a global price-driven effect that weighs on energy use worldwide.
Gazprom’s curtailment of gas supply to Italy has become a concrete example of the broader shifts in European energy flows. In the first eight months of the year, Europe absorbed roughly 10% less gas than in the same period of 2021, reflecting sharp contractions in residential and commercial sectors (around -12%) and even steeper declines in industrial usage (about -15%). Yet gas burned for electricity generation remained near 2021 levels, helped by drought limiting hydroelectric output. More than half of the nuclear fleet in Southern Europe and France faced months of downtime due to maintenance or detected defects, pushing gas-fired generation to fill the gap.
Declining demand in Latin America
The IEA projects that the downturn in gas demand will not be confined to Europe. In Latin America, a 4% decrease is anticipated, explained by stronger hydroelectric production compared with 2021 and softer demand driven by high prices in other sectors. In Brazil, gas consumption fell by around 12% in the first half of the year versus the previous period, while hydroelectric plants operated at higher capacity due to increased rainfall. In Asia, the report suggests a stagnant market for 2022, signaling only a modest revival after last year’s growth, with a very modest 1% uptick in China amid policy constraints tied to a strict Zero Covid regime imposed by Beijing.
North America stands out as one of the few regions with rising demand this year, though prices there climbed to levels not seen since 2008. The growth is largely tied to production dynamics, with a projected 4% increase in 2022 and 3% in 2023, reflecting a rebound in supply alongside regional demand changes.
Ribera critiques Brussels on its gas price intervention roadmap
The ongoing debate over price stabilization measures continues as the IEA emphasizes that a cohesive European strategy is essential to managing volatility in gas markets and protecting both consumers and industry from sharp price swings. The discussion centers on the balance between market forces and targeted support, with policymakers weighing short-term relief against long-term resilience.
Close to recession in the global market in 2023
The IEA expects the gas market to stay tense into 2023, forecasting another modest rise compared with this year and a renewed contraction in Europe of about 4%, with growth near 0.4% elsewhere. The report details several crisis scenarios should Russia decide to halt supplies to the European Union entirely. If such a disruption occurs after November 1, and European reserves fall from their current level around 90% to a dangerously low threshold, the region would have to rely heavily on liquefied natural gas (LNG) shipments to maintain supply.
If LNG deliveries do not arrive smoothly, reserves could dip further, potentially hovering near 5%. In that case, supply cuts could become a real risk during colder periods. Keeping reserves around 25% would require a 9% cut in demand through the winter, compared with the five-year average, to sustain a more comfortable buffer level of about 13%.