EghtesadOnline: The stage has been set for a European natural gas price war that will help boost demand and enable both Russia and the US to increase sales to the region.
The battle will not brutalize earnings too much because gas supply is just so profitable in Europe, where prices are more than double the prevailing level in the US.
And those costs probably won’t drop too far because higher carbon allowances and other climate measures are finally making the fuel’s traditional competitor, coal, less attractive, Bloomberg reported.
After last week successfully diluting planned European Union gas-market legislation to include loopholes for a controversial pipeline from Russia, Germany this week promised to build at least two terminals that open its market to seaborne imports, including from the US, Financial Tribune reported.
The direct competition between the world’s biggest gas producers should help stymie prices to some extent, even as Europe needs to boost imports to meet ambitious climate goals.
“If you factor in the need for Russia to utilize the pipeline and how it will compete with US LNG and other pipeline exporters such as Norway, then it could set the stage for a price war in Europe in the not-so-distant future,” said Nick Campbell, a director at industry consultant Inspired Energy Plc in England.
Gas prices in Europe are still prevailing at high levels even after falling since September.