Gas price shocks, gas supply, gas demand, elasticities, proxy-VAR, external instruments, temperature deviations, inflation.

C32, E31, Q38, Q41, Q43

We identify supply and demand shocks to the real price of natural gas in the Euro Area and the United States. Demand shocks are identified using exogenous temperature variations, while supply shocks are identified through a high-frequency strategy based on an extensive collection of market-relevant news. This approach enables us to estimate gas market elasticities and uncover key transmission channels through which gas price shocks affect the broader macroeconomy. Our findings show that gas demand in the Euro Area adjusts more slowly than in the United States, amplifying the inflationary impact of supply shocks. This effect is reinforced by inventory accumulation and financial volatility, pointing to a transmission channel driven by expectations and uncertainty. The aggregate real effects appear limited, though we document substantial sectoral heterogeneity.