The U.S. Can’t Solve Europe’s Energy Crisis

The EU’s energy ministers will meet on Friday to discuss emergency measures to protect consumers and businesses from exorbitant gas and electricity prices. Now, it is clear that the U.S. can’t solve Europe’s energy crisis.

The U.S. Can't Solve Europe's Energy Crisis

Europe is approaching the most perilous territory yet in its quest to disassociate itself off Russian energy — and the United States can only offer limited assistance, at least for the time being.

Why it matters: The West’s reaction to Russia’s attacks of Ukraine has shook the global energy commerce at a scale and speed unobserved in decades.

  • The implications for Europe are at an all-time high. Consumer prices are rising, and Europe’s energy-hungry industries are already struggling and reducing output.

Driving the news: President Biden made a pledge that the United States would send more natural gas to the European Union in an effort to extricate Western allies off Russian supplies.

  • And it has, however the two areas encounter physical restrictions that limit how much near-term supply can continue to grow.
  • In order to liquefy natural gas, which is required to ship gas abroad, the U.S. is essentially using all of its capacity, and Europe has insufficient facilities to actually accept the imports.

Where things stand: Prior to the incursion of Ukraine, about 40% of EU gas was supplied by Russia. It has already declined significantly, and prices have risen as a result of tight markets and geopolitical risks.

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  • The U.S. and EU announced earlier this year that they had reached an agreement for increased supplies for this year and through 2030.
  • The short-term goal appears to be within reach, thanks in part to the United States’ shift of Asian exports to European customers.

But, but, but: It might not be successful this year again.

  • While U.S. companies have increased liquefied gas shipments to Europe, Anna Mikulska, an expert in gas markets and geopolitics, tells the media that more competition for those supplies may be on the horizon.
  • In any case, it still only meets a small portion of Europe’s needs. It will take more than one nation to replace the entire amount of gas that Europe imported from Russia last year.

The intrigue: More export infrastructure is already planned to go online in the upcoming years, and the U.S. gas industry is eager to keep cranking up shipments abroad.

  • Industry also wants faster approvals for export projects, pipelines to transport gas to the coasts for liquefaction, and other policies.

However: These industry objectives may clash with climate policies on both sides of the Atlantic.

  • Environmentalists are pressuring President Biden to limit the production of fossil fuels. By not only diversifying suppliers but also accelerating the transition away from those sources, EU countries are already trying a swift and permanent move away from Russian coal, gas, and oil.
  • This results in a complex dynamic for Europe’s construction of new import infrastructure and pipelines. Even though nations currently need more gas, projects frequently rely on long-term contracts, and officials are sticking to their promises to significantly reduce greenhouse gas emissions in the coming years and decades.
  • Major new gas infrastructure “kind of goes against often what’s acceptable in many of the countries by both the government and the society, because they feel that one shouldn’t be grandfathering natural gas into the system,” says Mikulska.

What’s next: The EU’s energy ministers will meet on Friday to discuss emergency measures to protect consumers and businesses from exorbitant gas and electricity prices.

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  • Major consumer assistance programs have already been unveiled by European countries in response to the crisis, including Germany’s $65 billion plan that was announced over the weekend.

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