A recent study by the management consultancy Boston Consulting Group (BCG), reported by the German business daily “Handelsblatt”, highlights the costly consequences of Europe’s shift away from long-term gas supply contracts. The investigation, undertaken independently by BCG, reveals that Europe is less reliant on contractual gas agreements compared to other world regions, leading to higher prices.
The study indicates that 28 percent of the European Union’s current gas needs are not covered by long-term contracts. This contrasts sharply with other nations; India requires only 17 percent of its gas to be procured on the short-term market, while China’s figure stands at 12 percent. Japan, the analysis shows, has even secured more gas at fixed prices than its total consumption requires, eliminating the need for short-term trading.
The BCG study further details the gas price thresholds at which various industries experience margin reductions or even negative profitability. Specifically, sectors such as aluminium and basic chemicals, refineries and paper production are projected to see their profit margins turn negative at a wholesale price of €60 per megawatt hour. This analysis provides insight into the vulnerabilities of key European industries as they navigate the challenges of energy transition and fluctuating global gas markets.