- The US was a net importer of natural gas just seven years ago. Today, it’s a top exporter.
- In contrast, Europe is now facing an energy crunch in part due to under-investment in fossil fuels.
- The crisis is sparking a rethink of the world’s transition to green energy.
For decades, Europe has been able to keep the lights on by relying on cheap natural gas piped in from Russia.
Today, Europe’s energy security is under threat. The continent is under pressure to cut Russian natural gas amid criticism that it’s funding the war in Ukraine. Russian President Vladimir Putin has also threatened to cancel existing energy contracts if payment isn’t made in rubles, a move that could be a breach of sanctions.
But US President Joe Biden in March promised to deliver more liquefied natural gas (LNG) to Europe this year to help with the energy crisis — a move that could potentially provide some relief to Europe and solidify America’s role as a leading natural gas exporter in today’s market.
America’s position of strength in the gas industry stands in contrast to Europe’s vulnerability in the continent’s energy security. Here’s how the two got there.
US turned to shale as Europe turned to renewables
It wasn’t too long ago that the US had to import much of its natural gas. In 2007, America’s natural gas imports peaked, according to the US Energy Information Administration.
Less than two decades later, the US has become a net exporter of LNG, the supercooled version of the fuel that can be transported on ships. The shift can largely be attributed to the US’ large-scale deployment of fracking technology, which led to a revolution in shale gas production. The US is now jostling for position with Qatar and Australia as the world’s top LNG exporter.
The US’ development of the natural-gas market came amid a worldwide shift from coal to cleaner fuels. Even though natural gas is a fossil fuel, it’s seen as a relatively clean one when compared to coal and oil.
In contrast, natural gas output from Europe and the UK fell by more than half from 2010 through 2020 due to depletion and a conscious effort to phase out the fossil fuel. Environmental concerns also contributed to a fall in exploration activity in the North Sea and against fracking, which has been banned in some countries.
“At the same time, Russian natural gas was easily available and inexpensive so as these countries began turning from coal and nuclear, they increased their natural gas usage,” Matthew Pitzarella, a coleader of the energy industry team at law firm Buchanan Ingersoll Rooney, told Insider.
Europe is using natural gas as a bridge to full renewables
Europe wasn’t going to depend on Russian natural gas — or any other fossil fuel — forever.
The continent has vowed to be carbon neutral, producing net-zero greenhouse gas emissions, by 2050. It was looking to natural gas as a transition fuel in its trek to generating all of its energy from renewable sources like sun and wind.
At the same time, there was a global shift away from fossil fuels due to climate concerns. So energy companies became increasingly wary about long-term projects, Saudi Aramco CEO Amin Nasser told Reuters on May 23.
This led to underinvestment in traditional fuel sources to adequately ensure energy security during the transition to renewables — and that was without the Ukraine war factored into the equation.
“What happened in Russia-Ukraine masked what would have happened,” Nasser told Reuters.
Before the war in 2021, Europe was facing an energy supply crunch due to a season of weak winds last summer, Davide Oneglia, a senior economist at London-based consultancy TS Lombard, told Insider.
Europe’s energy crisis sparks rethink of transition to renewables
The supply shock from the war in Ukraine is sparking a rethink of the transition to renewable fuels.
“You always have to rely on something that can produce energy under any condition,” said Oneglia.
In a document on May 18, the European Commission said the EU would now have to burn coal for longer.
Some big investors like pension funds and endowments are also starting to look at putting money into the sector after years of shunning it.
“The energy transition is going to be more complicated,” said energy historian Daniel Yergin at the World Economic Forum in Davos on May 24, per Bloomberg. “The amnesia we had about energy security has been put aside.”