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Contracts in Crisis: The War in Ukraine and Long-Term Contracts in Energy Markets

Author

Listed:
  • Mats Kröger
  • Karsten Neuhoff
  • Sebastian Schwenen

Abstract

We examine the impact of the war in Ukraine on long-term contracts in energy markets. We find that traded contract volumes fall by 65 percent in the first months of the war. A collapse in bilateral trading contributes most to this decline. To protect themselves from price shocks, firms increasingly turned to long-term contracts already before the war. In sum, our results show that the market continued to serve firms’ hedging needs during the crisis, but bilateral trading networks collapsed, and liquidity was largely provided by centralized markets.

Suggested Citation

  • Mats Kröger & Karsten Neuhoff & Sebastian Schwenen, 2025. "Contracts in Crisis: The War in Ukraine and Long-Term Contracts in Energy Markets," Discussion Papers of DIW Berlin 2118, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2118
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    More about this item

    Keywords

    Firm behavior; long-term contracts; forward markets; crisis; electricity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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