European gas prices soar to four-year high over winter supply fears
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Supply shocks, Supply, demand and prices, Cost-push inflation
What happened
European gas prices rose to their highest level since 2022 amid fears of Middle East supply disruptions and concerns about winter supply.
The economics
This is a classic supply shock: fears of disrupted supply shift the supply curve left, raising wholesale prices when demand is relatively inelastic. Students can draw a leftward supply shift showing higher price and possibly lower quantity traded.
Evaluation
The spike reflects expectations and risk premiums rather than actual supply already falling; prices may ease if winter supply is not truly disrupted, but sustained disruption would pass higher energy costs into wider inflation.
Practice question
Using this example, analyse how a supply shock affects the equilibrium price in a market and discuss its possible impact on the general price level.
Read the article ↗ · Draw the diagram in the Diagram Lab
Where it fits in the syllabus
- Supply shocks: A sudden change in supply, such as energy, food or supply-chain disruption, that moves prices and output.
- Supply, demand and prices: How a change in demand or supply in one market moves its equilibrium price and quantity.
- Cost-push inflation: Higher costs of production such as wages, energy or materials lead firms to raise prices.
- IB Economics: Demand, Supply and Elasticity, Aggregate Demand and Supply
- A-Level Economics: Supply and Demand, Aggregate Demand and Supply, Macroeconomic Objectives
- AP Macroeconomics: National Income and Price Determination
- AP Microeconomics: Supply, Demand and Market Equilibrium
- IGCSE Economics: Demand and Supply, Macroeconomic Objectives