Dilemma: Will Trump use Europe’s need for gas to strengthen the US?
Winter is coming, the cold is coming and Europe will need imported natural gas. Ziarul Financiar wonders if Donald Trump will use this vulnerability to make America great again.
Dilemma: Will Trump use Europe’s need for gas to strengthen the US?
In the first half of this year, almost half of the liquefied natural gas imported by the European Union came from the USA and only 16% from Russia. Ursula von der Leyen, the head of the new European Commission, suggested that the EU could try to replace Russian gas with even more American imports. This would mean a greater dependence for the Union on the energy exported by the USA.
The Economist points out that most of the LNG exported by American companies goes to countries that have a trade surplus with the US. The president-elect of the Americans, Donald Trump, does not like the trade surpluses that others have with his country. Will he use gases as a weapon or as leverage to rebalance trade relations? And if so, in what way?
A gas war started by the future leader of the White House is about to begin, The Economist wrote a few days ago. More recently, Trump made his first explicit threats to levy tariffs on imports, his weapon of choice for reducing trade deficits. The targets were Mexico, Canada and China. For Chinese products, the additional tariffs are 10%, and for Canadian and Mexican products, 25%.
Trump’s decisions do not yet have the force of law, but markets have reacted as if his threats will be followed by action. The currencies of the three countries targeted depreciated. Shares of European automakers fell, although Europe was left out by the Republican president. The US is the largest importer of goods in the world, while Mexico, China and Canada are their main suppliers. Mexico, among the world’s largest importers of natural gas, is dependent on American gas. China also imports LNG from the US, and purchases have increased by 63% this year, according to Bloomberg.
There are supply contracts for next year as well. The US is the fifth largest source of LNG imports to China. Bloomberg believes that Trump may jeopardize these supplies if he keeps his word on overtaxing imports from China, but in the sense that Beijing could retaliate by further taxing American gas imports. On the other hand, China could use its status as a gas importer as leverage in negotiations, promising to buy more American fuel to reduce the trade surplus it has with the US in the hope that Trump will abandon the surcharge. This is what Ursula von der Leyen also proposed. China, like the EU, also imports LNG from other countries, especially from the Middle East. China buys massively from Iran.
But Trump came close to taking the US to war with Iran in his first term. Trump promised Americans that he would quickly cut their energy bills in half. He promised the oil and gas industry that he would help it produce more, including by deregulating and reversing the policies of incumbent President Joe Biden, who froze the industry’s LNG export licenses on environmental grounds. Without these licenses, producers cannot develop new projects in the long term. One way that gas on the US domestic market can become cheaper is overproduction. This situation can be reached by increasing production and limiting exports. But cheap gas discourages and even prevents producers from developing.
Reuters writes that Trump and his team are preparing a comprehensive plan to increase gas exports and oil production. The information comes from sources close to the situation. The plan would be presented on the very first day of Trump’s new mandate, when he will declare an energy emergency to speed up the procedures. On the same day, the tariffs on Canadian, Mexican and Chinese imports would be presented. Most analysts agree that Trump’s arrival in the White House will bring changes to the international natural gas and oil markets.
Some say that his tariff policies will slow down the growth of the global economy or just a few economies, which will translate into lower fuel consumption and implicitly lower prices. Others draw attention to Iran. If the US will intensify its pressure on this country and limit its access as an exporter to the international oil and gas market, the quotations may increase. In this case, more room is created for American exporters. Meanwhile, Washington has imposed sanctions on Russia’s Gazprombank, which could mean blocking the only way European customers of Gazprom, the Russian gas export monopoly, can pay for fuel imported from Russia.
Source: www.mediafax.ro
