01 Aug 2023 1 min read

Chart of the month: Europe’s LNG binge and the dangers of partial analysis

By Christopher Jeffery

The speed with which Europe pivoted to LNG following Russia's invasion of Ukraine took many - us included - by surprise.


2022 heralded a massive structural change in the European energy industry, with LNG imports surpassing pipeline imports in a reversal of the historic pattern. The chart above illustrates just how rapidly this transformation occurred, with the sharp fall in pipeline imports matched by an equally sharp spike in LNG imports. As a result, Europe is increasingly insulated from what happens in Russia.

Since 2021, pipeline gas imports are estimated to have fallen by over 70%. But that has been largely offset by a near doubling in LNG imports as a rapid build-up of port infrastructure quickly drove down natural gas prices after the initial price spike.

One important lesson from the episode was the risk of partial analysis based on previously reliable indicators that could be subject to change following market upheaval.

A focus on the sharp fall in pipeline imports led many observers, ourselves included, to overestimate the risk of a severe recession in Europe in the first half of the year. Like others, we didn’t fully anticipate how far higher levels of LNG imports might offset the loss of Russian gas supplies, limiting the severity of the energy crunch and its knock-on effects to the wider economy.

Christopher Jeffery

Head of Inflation and Rates Strategy

Chris works as a strategist within LGIM’s asset allocation team, focussing on discretionary fixed income and systematic risk premia strategies. He coordinates global rates and inflation strategy across LGIM’s asset allocation and fixed income capabilities. He joined LGIM in 2014 from BNP Paribas Investment Partners where he worked as a senior economist and strategist within the Multi-Asset Solutions group. Prior to that, he worked as an economist within monetary analysis at the Bank of England with a focus on the UK domestic economy. Chris graduated from University College, Oxford in 2001 with a first class degree in philosophy, politics and economics. He also holds an Msc in economics (research) from the London School of Economics and is a CFA charterholder.

Christopher Jeffery