World Economy and Policy, 2026 (vol. 2026), issue 1

Pedal to the Metal: Natural Gas Prices and the Czech Automotive Industry

Michal Hrubý

World Economy and Policy 2026, 2026(1):1  

How do changes to the real price of natural gas following a supply shock impact the automotive industry? This paper examines the volatility of European natural gas prices and its transmission to output and prices in a case study of the Czech automotive industry. Despite an immediate drop following the supply shock, production recovers quickly and increases over the medium term. Producer prices increase immediately and then gradually return to their baseline. I document large heterogeneity between car, body, and parts producer prices. The body producers actually face downward price pressure at the end of the horizon. Moreover, producer prices respond...