Skip to content

Europe Needs American Gas. But U.S. Leaders Aren’t Capitalizing On It. Why?

american gas - el american

By: Tate Sanders

Despite living in the 21st century, mankind has failed to elevate into the science fiction of Star Trek, an era of nearly abundant resources and large parts of the universe tamed for peaceful sentient life to enjoy those nearly abundant resources. Also, to even come close to this utopian future, energy must be accessible, affordable and secure, so that people can enjoy any substantial amount of the world’s potential bounty. Finally, the laws of supply and demand have not disappeared or changed since the ideas surrounding the concept were developed centuries ago, and have been in practice for millennia. February 2022 was a bold reminder to the world that these crucial realities should not be ignored.

Before the Russian invasion of Ukraine, the summer should have seen gasoline prices rise, in large part due to the summer driving season, and natural gas prices are supposed to moderate with less harsh weather. During this period of time, European Union member states are usually low in terms of their natural gas reserves, if they have any facilities for storage at all, and during this time, begin to replenish the facilities for the upcoming winter.

This summer, natural gas prices are spiking at a tremendous rate, due to the war and many other factors. Also, and even more importantly, there are fears that there won’t be enough fuel to even power Europe through the winter, especially if it is a bitterly cold one.

Partially, this is the byproduct of attempting to reduce, if not eliminate Russian energy imports, which account for about 40% of the EU’s consumption, based on 2021 statistics according to the International Energy Agency (IEA). Adding to this, the price of natural gas futures in June 2022 in Europe is close to 100 euros ($106) per megawatt, almost quadruple of what they were last June based on numbers assembled by Trading Economics. With Europe already in a stagnant economic growth pattern, and having transitioned too much away from nuclear power and natural gas, the potential for massive energy shortages next autumn is frightfully high.

According to the head of the IEA in early June, “I am a [sic] especially worried about the natural gas markets … if we have a harsh and long winter we may see very difficult days.” Combine this with the fact that there is still clamoring from the green energy and climate lobby for a reduction of fossil fuels, even in the midst of the current crisis, it is not hard to see why so many are worried about Europe’s near-term energy future.

One bit of seemingly positive news on the energy front was secured this past March, a month after the invasion of Ukraine. The United States and the EU reached an agreement that would form a task force to reduce Europe’s over-reliance on Russian fossil fuels. So far, so good. However, after announcing that the U.S. will promise to supply additional American gas, there is another section, outlining the overall reduction in natural gas demand in the coming years and decades. “The United States and the European Commission will engage key stakeholders, including the private sector, and deploy immediate recommendations to reduce overall gas demand by accelerating market deployment of clean energy measures.”

In a few words, the potential for victory over dearth and aggression is in danger of being consumed in the jaws of defeat. Despite great attempts to move away from fossil fuels, the world, and Europe as well, are still heavily reliant on natural gas to fuel the immediate and mid-term energy future. In addition, announcing the plan of adding an initial supply, and subsequently announcing a retreat from gas, sends a message of weakness to Russia, reinforcing that the West is fickle and unwilling to actually put longer-term pressure on the Kremlin and Russian energy producers. This agreement in short is at best a band-aid to a still large and festering wound.

Granted, America has come a long way in terms of deliveries of natural gas, in the form of liquid natural gas (LNG) in the past few years. Spearheaded and promoted largely by the previous Trump administration, American gas shipments accounted for ¼ of all imports to Europe in 2021, followed by very solid imports in 2019 and 2020, according to data by the U.S. Energy Information Agency (EIA). While Russian LNG accounts for 20% of European imports, this is an improvement, but it is not enough to blunt the energy shortage to come, and the desire to punish Russia economically too.

Only in early 2022 did American gas production return to levels similar to the pre-pandemic months of 2020, again according to the EIA. With American consumers needing more energy in the return for some measure of normalcy, other countries, especially China, will be on an ever-growing list of countries with their own demands and needs to be filled. This will require a reassessment of U.S. energy policy going forward, especially if Europe is to receive an ever-increasing amount of energy as well.

The environmental lobby will have to take a backseat for the foreseeable future. Green energy is still on the whole too expensive and too unreliable compared to fossil fuels. Combined with the shuttering of nuclear power plants, particularly in Germany, there just isn’t enough energy production in Europe to fill in the impending gap. To help immediately, the United States must forgo green extremism and become energy dominant once again.

This includes opening/reopening lands for drilling, stopping or reversing onerous regulations, and an end to demonizing the oil and gas companies, which could be the potential salvation for Europe’s energy security, and for the world’s prices to fall and stabilize through supply and demand economics. Finally, this must be done on a long-term basis, not as a temporary stop-gap measure. Otherwise, another crisis would merely overwhelm the energy situation around the world again, requiring yet another stop-gap solution.

Only the United States can surely aid Europe in this critical hour. With the enormous reservoirs of natural gas just waiting to be tapped, and facilities finally pumping out massive amounts of LNG, now is the time for America to truly show her energy muscle, not just in peace, but in a time of war. However, the real question is, will American political leaders have the will and foresight to use it?

Tate Sanders is a Budapest Fellow focused on energy policy.

Leave a Reply