Some months ago, while discussing coal markets and pricing here, I mentioned that natural gas pricing that everyone was depending on for cheap/clean energy in US would face upward pricing pressures. Liquefied Natural Gas markets opening in Europe would suck up the gas glut in US. Of course, pipelines to LNG conversion plants and ports had to be built, tankers to transport it, etc… all had to be constructed or reserved.
I had two points at the time.
1) Coal as energy source could return if the equation of;
coal + environmental costs < natural gas + environmental costs.
2) It is a strategic goal of US/NATO to reduce Europe’s dependence on Russian Nat Gas supplies.
These two factors could drive Nat Gas higher pricing and make coal an economic alternative…if the other associated costs could be worked out. This is not to tout or promote it as an energy source, just stating facts.
Already US Henry Hub bulk pricing of NG around $2.85- $3.00 mbtus vs coal’s $2.18 mbtu in US. Pipelines are being proposed from Northern WV/PA gas fields- through VA and splitting- one toward the coast, the other to high growth NC/SC. Ports under construction or being converted. Next couple of years, those ships will be sailing for Europe in greater numbers.
This is now being discussed openly in economic press.
—–excerpt——-
“US and Russia step up fight to supply Europe’s gas”
https://www.ft.com/content/352f4cac-6c7a-11e7-b9c7-15af748b60d0
Jason Bordoff, a one-time adviser to former US President Barack Obama who runs Columbia University’s Centre on Global Energy Policy, suggests that while LNG is normally more expensive, Gazprom will still face painful choices as supplies from rivals make their way to Europe. The Russian group has to pick between “competing on price and defending market share” or “cutting back on supply to keep prices high”, he says.
If Gazprom decides to opt for the former, which Mr Bordoff thinks the evidence points to, then the Russian company will need to accept it is entering a price war that may hit its revenues even if it can keep raising sales in a region hungry for energy.
The US president’s overture to countries such as Poland chimes with the mood among pro-Nato politicians in central Europe, who resent Moscow’s leverage over their gas supply with their web of import pipelines. Some might happily rely more on the US for their gas, even if it means paying more. …..
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Of course, it always comes down to money. Finding the price of US LNG is tough to determine once it lands in Europe. Nice that these guys have worked it out.
LNG to Europe is about $6.00 per mbtu where Russian Gazprom supplies it at about $5.00 per mbtu. Around 20% surcharge. But, LNG is now being pooled into international markets, like oil with advent of US, Australia, and Mideast supplies. That means, like oil, the supplies can be bought and routed when the best price appears.
Gazprom has gone into hock with Western capital for new pipelines into Europe, and add to that downward price pressures and the added trouble of Sanctions…means less money in the pockets of Vlad and Co. Which means added pressure on Vlad.
This is one more slavo in the War On Czar Vladimir.
Russia has very few International products people want.
-Weapons: useful but limited market.
-Energy and other natural resources: dependent on global pricing
-software engineering
The last one has the premier example in Kaspersky Labs. Well regarded anti-malware, but since the hacking of the election; it has been downgraded and denied use in US govt/contractor networks. Also NATO and Western Europe will begin to question it. Always viewed with suspicion by US intel, now openly slagged. That is going to filter down to Enterprise and private use.
I always thought the OPEC over production had a geopolitical element against Russia and Iran. Now with major LNG exports on the horizon, even greater pressure.
That just leaves weapons as an export product to prop up foreign exchange.
To use a worn analogy-
US used economic sanctions against Japan for aggression in Asia. (As Russia in Ukraine) Got to the point, that secure their place in Asia and world stage and gain “respect” they staged Pearl Harbor. People in Tokyo who knew US, thought it was a mistake. the “Sleeping Giant” quote.
Well, I think the 2016 election was a cyber Pearl Harbor. Like then, it will take a couple of years to show real progress. Trump and Admin is toast already and you see the security hands in Congress/military stepping in to insure the Admin Chaos does not permanently damage US. I mean, good Lord, veto proof Sanctions Bill and pro forma Senate session. They know he is history.
What now has to be done is put pressure on Czar Vlad’s oligarch cronies. “I’m sorry Yuri, would love to do this deal, but can’t as long as Putin is in power. You know, sanctions and public opinion, the election and all that. I mean, with all the court case revelations…did he really think we would just stand by?”
Of course, that presupposes that US corporate interests have any patriotism left, aside from love of money. For years, they have been pushing stateless interest for profits over love of country. It may mean boycotts of their products and public shaming to make them tow the line.
Ridge