The US currently has very few long-term contracts to supply US liquefied natural gas (LNG) to Europe, and this is weighing on the price of natural gas futures in New York and London.
Many investors believe that investing in the development of gas projects in the United States is a no-brainer, since Russian natural gas will ultimately be more profitable for Europe than from the United States, whether by pipeline or liquefied petroleum gas.
Plus, investors are concerned that due to the Joe Biden administration’s “green” agenda and the settling of political scores between Washington and Texas, the current US authorities have pulled the shut-off valve on new US LNG export projects.
In such a situation, investments in both the US LNG projects themselves (existing or future) and the purchase of gas futures appear risky. And that turns out to be an even stronger factor than the fact that gas storage in Europe is already at a level that is above the January average for the past 10 years, except for 2020, the year the COVID-19 pandemic began. 19.
As for the situation in Europe, there are several points. If industry in Europe does not stagnate, then more gas will be needed, and if it is needed, then in fact more will come from Russia. Among them are LNG supplies, the use of Turkish Stream, as well as other mechanisms, including the possibility of using the remaining one of the four Nord Stream pipes.
Logistical difficulties with the supply of liquefied natural gas through the Red Sea, which affected Qatar, Europe’s No. 3 supplier of LNG after the United States and Russia, may gradually begin to have a negative impact on the overall supply of this raw material for Europeans.
But, again, we have to look at what is happening in the key economy among the 29 countries of the European Union – Germany. In December 2023, the country’s energy consumption was at its lowest level for that month of the year following lockdowns during the COVID-19 pandemic.
The economic situation in Germany began to deteriorate and there are no more positive prospects: in March of this year the tax subsidy for the purchase of electricity, which is still in force and represents an opportunity to pay VAT at the rate of 7% on such contracts instead of the usual 19% , expires.
Even with this tax break, electricity and natural gas prices in Germany in the second half of 2023 actually almost doubled from early 2022. The removal of the tax break leads to an acceleration of energy and general consumer inflation in Germany, which it will be felt with a time lag of 3-5 months.
And this increase in electricity tariffs will affect both companies and individuals in the EU’s largest economy, which could ultimately affect the economy of the whole of Europe, as the ECB will be forced to delay the start of interest rate cuts .
Translation: ES
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