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Is the US to blame for Europe’s high gas prices?

European politicians do not shine with a particular ability to make causal links. The German economy minister last week lashed out at the US for Europe’s ‘astronomical’ energy prices. One wonders whether the minister has suddenly lost his ability to solve simple energy equations, which usually begin with the responsibility of each government for developing its oil and gas reserves. Nobody owes anybody anything. In most instances, large European energy companies buy cheap American natural gas at Henry Hub prices, then sell it to EU customers at European /most often TTF/ prices.

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It’s nobody’s fault that the EU has banned shale oil and gas extraction and satanize oil and gas as the ultimate culprit for climate change.

And now according to the EU climate-centered politicians it’s America’s fault that natgas prices in the US are €22 per MWh, while in the EU, they are five times higher, until recently 10-15 times higher. The situation will not improve, although in the short-term, gas prices have dropped due to oversupply and shortage of LNG receiving infrastructure. Wait until the end of January. Prices will remain low only in markets with sufficient liquidity due to local oil and gas production. Then, whatever the German and other EU governments preach – gas prices in the US will remain much lower. And it’s not because of President Biden’s unique abilities to influence markets; he’s just taking advantage of President Trump’s refusal to shut down the oil and gas industry because of climate change radicals.

Whining, not mining. To make things worse, European energy companies, directed by EU governments, perceive the current gas crisis as a short-term nuisance that will wither away. Alas, this is the ultimate nonsense, as the mismatch between demand and supply will take years to rebalance. Yet, EU gas buyers refuse to engage in long-term contracts to buy US natural gas. Correspondingly, the upstream companies in the US are cautious about investing billions in developing new O&G fields. A perfect vicious circle with the blame entirely in Europe’s court.

Europe has yet to fall into a stupor trying to adjust to the mismatch between reality and its ambitions.

Ilian Vassilev

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