08. 11. 2024
AUTHOR: Aymeric Kouam
As the European Union (EU) navigates its energy transition, the outcome of the 2024 United States (US) presidential election plays an important role in defining the bloc’s energy security, especially regarding its reliance on the US liquefied natural gas (LNG).
The impact of a Trump presidency on EU’s LNG dependency
The EU’s reliance on US LNG has grown significantly in recent years. Following the war in Ukraine and the resulting reduction in Russian gas imports, Europe turned to the US as a primary LNG supplier to meet its energy demand. In 2023, the US became the EU’s largest LNG supplier, representing half of the total LNG supply. This growing dependency is exposing the EU to vulnerabilities linked to US domestic policy shifts and the political landscape. The Trump administration is likely to use it as a pressure tool on Europe.
The incoming Trump administration will seek to expand the US LNG infrastructure and increase exports to the EU, creating a greater dependency risk as Europe shifts away from Russian gas. This would threaten EU energy security, by creating a new over reliance on a single supplier at times when it still imports LNG from Russia. In the first half of 2024, 47% of the EU’s LNG imports were from the US, 18.7% from Russia, and the rest from Algeria, Qatar, Norway, and others.
At the same time, the Trump administration could impose a tariff on LNG which would effectively increase LNG prices even further and cause notable effects for companies and households. LNG imports then turn into a bargaining tool to pressure the EU to make trade concessions. The sooner the EU can phase out its reliance on gas, the more resilient it will become to geoeconomic threats and price volatility, benefiting its economy, security, and societal stability
Global LNG market dynamics
According to the International Energy Agency (IEA), global LNG supply capacity is expected to increase by 47% in 2030 compared to now, – with the largest capacity expansion in the US and Qatar.
LNG prices are inherently volatile, with extreme fluctuations, driven by global market demand, shipping costs and other geopolitical factors. This affects Europe’s energy security and competitiveness. As highlighted in the Draghi report, gas prices in the EU are three to five times higher than those in the US, and electricity prices are two to three times those in the US and China. Such disparities, driven by the high dependency on fossil fuels imports are detrimental to the EU’s industrial competitiveness.
Fig 1. Gas and retail electricity prices for industry in the EU, the US and China
A shift in the EU’s gas demand
The Trump election is yet another reason for the EU to revise its energy security strategy. Geopolitical power lies with those that have the ability to influence energy prices and trade flows, it becomes a severe risk if they use it strategically like Trump or Putin. Moving beyond diversification of gas imports to a proper phase out plan has become a security and economic imperative to avoid the EU turning even more vulnerable. By reducing its overall gas consumption through the net-zero transition, the EU can improve its resilience and avoid such pitfalls of energy dependency on imported fossil fuels. New renewable energy and electrification targets – with efficiency standards – for heating, transport and industry are central to this strategy. Given half of the economy is expected to be electrified by 2040, an Electrification Plan can be an essential driver for building the EU’s energy independence if it turns into legislation with clear goals. It could incorporate the target to fully decarbonise power generation by 2037 with an 80% share of renewable energy.
According to Strategic Perspectives, this electrification plan that backs a 90% climate target could decrease the EU gas demand by 84% by 2040, compared to 2023. Commissioner-Designate for Energy and Housing, Dan Jørgensen, confirmed the need to electrify the European economy and boost renewable deployment through a new 2040 target to secure affordable energy prices, and end Russian fossil fuel dependence. Trump’s election can turn this into stronger priorities and additional policies to reduce exposure to all gas imports, including the US LNG.
In this context, it is important for the EU to avoid relying on short-term solutions like US LNG and instead prioritise advancing its decarbonisation efforts. This is essential to securing an independent geoeconomic position in the years to come.
