Can the EU Impose Taxes on US LNG in Reaction to Trump’s Tariffs?
Mr. Choeib Boutamine
February 9, 2024
Article by Choeib Boutamine
Natural gas prices continued their ascending cadence today, reaching 56 EUR/MWh, the highest in two years.
At the beginning of this month, the EU storage sites were at 53% (the lowest since 2022).
The current prices have more than doubled compared to the same period in 2024. Natural gas is still the backbone of many industries, especially petrochemicals, as most firms rely on it to meet their manufacturing needs.
During this time of year, natural gas is also in demand from households for heating, as we have witnessed very chilly weather in the last few weeks, which has accelerated consumption from inventories since renewable-generated electricity did not achieve the desired targets of many EU countries.
In Germany, for instance, wind energy dropped by 25%. The gap left by renewables has pushed LNG traders to replace piped gas supplies through Ukraine, which expired in December 2024. Roughly 43 million cubic meters had been flowing every day through the mentioned pipeline, which has now turned to nil.
In the last few days, the US president hinted at imposing trade tariffs on the European Union, similar to those on Canada, Mexico, and China. The aforementioned countries, particularly Canada and China, reacted by imposing taxes on US products. But here comes a big question:
in 2024, more than 50% of US LNG was driven to Europe, so can Europeans impose taxes on US LNG?
Certainly not! Any measures against this LNG will create an internal energy crisis in Europe and will deplete inventories at a rapid pace, thereby deepening the economic crisis and leading to inflation.
How can Europeans deal with this situation to manage the energy landscape, given that they have been engaged in large-scale projects related to carbon neutrality plans?
Again, on January 20th, the US president signed an executive order to withdraw from the Paris Climate Agreement, complicating the global target to achieve climate neutrality by 2050.
Can renewables fill the gap if we witness any supply disruption of LNG from the US?
The EU Commission has made a plan to fill the storage to 90% by the first of November as a precautionary decision to ensure a more balanced winter season with renewables; however, it seems that these targets need to be reviewed in the absence of vital alternatives to piped gas, as LNG is ensuring supplies but is also causing difficulties for many industries due to its soaring prices.
This comes at a time when Asian countries are more comfortable with their suppliers (Qatar and Australia).
It’s worth noting that Europe is still getting steady supplies of natural gas through pipelines from reliable and trusted sources in North Africa, but the question is:
Will Europeans seize the opportunity to invest more in North Africa, especially in Algeria, which is home to 20 TCM of non-conventional recoverable resources of natural gas, ranking 3rd in the world?
Article by Choeib Boutamine
