Germany as a Price Taker: Why Energy Imports Are Becoming a Structural Risk

• Due to its high dependence on energy imports, Germany is structurally a price taker on global energy markets.
• Energy price shocks have a direct impact on inflation, purchasing power and energy-intensive industrial production.
• Germany’s structural dependence on energy imports should be taken into account in portfolio construction. 

Energy is once again moving to the centre of geopolitical power calculations. The latest escalation in the Middle East illustrates just how closely energy prices, security of supply and foreign policy room for manoeuvre are interconnected. For resource-poor industrialised countries such as Germany, this creates a structural risk: countries that have to import a large share of their energy needs are particularly exposed to price fluctuations and geopolitical shocks.

While the US has been strategically using its energy policy strength for years and has massively expanded it through fracking, Germany remains highly dependent on imports. This dependence not only limits its economic policy room for manoeuvre, but also increases its vulnerability to external energy shocks. Combined with an energy-intensive industrial base, this creates a location disadvantage that extends far beyond short-term price fluctuations — Germany is an import-dependent price taker.
 

The Extent of Dependence

This dependence is concentrated in a few key energy sources. Mineral oil, natural gas and hard coal are almost entirely imported in Germany; in 2024, the import share stood at 95 percent for natural gas, 98 percent for mineral oil and 100 percent for hard coal. At the same time, around four fifths of primary energy consumption are still covered by precisely these fossil fuels and domestic lignite. The energy transition has so far done little to change this.

On the contrary: with the accelerated nuclear phase-out after 2011, Germany lost a domestic energy source that contributed to security of supply without creating a high degree of import dependence. Nuclear energy tends to increase import dependence less than oil and gas because the quantities of fuel required are small and sources of supply are more broadly diversified internationally. Renewable energy was expanded significantly in parallel and has largely compensated, in volume terms, for the loss of nuclear energy in the primary energy mix. In terms of secure, always-available generation, however, a gap remained — one that continues to be filled by fossil fuels in heating, industry and transport. In addition, during periods of low renewable feed-in — the so-called Dunkelflaute, when there is little wind and sunlight — fossil-fuel power plants have to step in as backup. The result is that the import share of primary energy has risen since 2011.

The vulnerability of this system became clearly visible in 2022. At that time, more than half of Germany’s natural gas came from Russia. When these supplies were cut off as a result of the war in Ukraine, sources of supply had to be changed at short notice — primarily to gas imports from Norway and LNG imports from the US. The supplier changed, but the dependence remained — and energy costs rose.

Macroeconomic Effects of Energy Dependence

The price of this dependence is paid on at least three levels. First, through inflation: energy price shocks translate, through a well-known mechanism, into higher producer and consumer prices, forcing the ECB to respond to supply-side price increases that it cannot control. Second, through a loss of purchasing power: German households lost real income between 2021 and 2023 — a direct consequence of the energy bill, which could not be offset by wage increases. Third — and particularly serious — through deindustrialisation. The data on production trends in Germany show a clear downward trend. The output of energy-intensive sectors — including chemicals, metals and paper — has remained relatively stable since 2023 at around 20 percent below its pre-Ukraine war level. The gap to overall industry, which is also suffering from high energy costs, is widening rather than closing. This is the hallmark of a structural problem, not a cyclical one.

Energy-intensive companies are increasingly relocating production to places where energy is affordable. These decisions are difficult to reverse. What remains is an economy whose industrial core is under sustained cost pressure and whose export model is losing substance. Every new energy price shock accelerates this process. Possible additional burdens from the latest escalation in the Middle East are, by their nature, not yet reflected in the production figures, but are likely to further intensify the downward trend.

The Consequences of the Escalation in the Middle East

Germany imports hardly any energy directly from Iran. The real vulnerability instead arises via global commodity markets. Any disruption in the Persian Gulf — such as attacks on production facilities, a closure of the Strait of Hormuz or the outage of Qatari LNG terminals — can reduce global supply and significantly raise prices for oil and gas. The Brent oil price briefly rose above USD 110 per barrel, reaching a level reminiscent of the price reactions following Russia’s attack on Ukraine. The gas price has also risen significantly, but so far remains clearly below the peak levels seen in 2022.

How severe the burden on the German economy ultimately becomes will depend largely on the duration and degree of escalation of the war. Already, however, there are many indications that the second major energy price shock within four years will noticeably slow Germany’s emerging economic recovery. The timing is also unfavourable: while Germany can draw on legally mandated emergency reserves for crude oil, its resilience in a gas crisis depends above all on the fill levels of gas storage facilities. These stood at only 22 percent at the start of the war. Refilling them before the next winter is therefore likely not only to become more expensive, but also to take place in direct competition with Asian buyers.

If the escalation persists, Germany faces the risk of recessionary tendencies and once again significantly higher inflation rates. Even a ceasefire would not immediately eliminate price pressure. Oil fields in the Gulf that have been shut down need weeks to months to fully resume production; damaged LNG terminals in Qatar are likely to cause even longer outages. In addition, uncertainty for shipping around the Strait of Hormuz remains. Geopolitical tensions are therefore likely to weigh on energy markets beyond the immediate course of the war.
 

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For Capital Market Investors

Germany combines structurally high dependence on energy imports with an industrial base that is particularly sensitive to rising energy prices and relative cost disadvantages. In an environment in which geopolitical shocks repeatedly and unpredictably drive energy prices, it may be worthwhile for investors to adjust portfolio exposure accordingly. Tactically, commodity positions and inflation-linked bonds can help cushion acute energy price and inflation shocks. Strategically, Germany’s persistent vulnerability as a business location argues for selectively underweighting energy-intensive German industrial stocks and placing greater emphasis on competitors from regions with lower energy costs. Germany’s structural vulnerability is not a cyclical phenomenon — it must therefore be permanently taken into account in portfolio construction.

This article was first published online in Börsen-Zeitung on 31.03.2026.
 

BEITRAG BÖRSEN-ZEITUNG