U.S.-Russia Gas War Sends Prices Plummeting in Europe

  • Date: 05/07/19
  • Fortune

When the U.S. and Russia go head to head, that can mean cheaper prices—at least when it comes to natural gas.

This week, European natural gas prices reached their lowest in at least a decade, fueled by a battle for market share between Russia, traditionally the continent’s supplier, and the U.S., whose gas exports have gained momentum on the back of the shale boom. 

On Tuesday, the Dutch front month gas price, a major indicator for the natural gas market in Western Europe, was at its lowest level since its launch in 2010 due to a flood of supply, according to consultants Rystad Energy.

“As two of the world’s largest gas producers, Russia and the U.S. are natural competitors in what seems to be a race to the bottom, not only in the lucrative Asian market but now also in Europe,” said Carlos Torres-Diaz, head of Rystad’s gas markets research, said. “Both countries have sent increasing amounts of gas to Europe despite the low price environment.” 

For Europeans, that means cheaper gas—although, with a heat wave across much of Western Europe, they won’t need it to warm their homes.

For the U.S., in particular, that means maintaining its stake has dwindling returns. Its rival Russia also faces a low-price environment, but Russia has the distinct advantage of location: costs are, by nature, lower because it can access Western European markets through both pipelines and ships, which carry liquid natural gas (LNG). The U.S., meanwhile, is limited to transporting its gas by sea. Right now, European prices are so low that, after factoring in the cost of shipping, the U.S. is exporting natural gas at a loss.

Despite the sinking prices, Russia and the U.S. have both stepped up exports sharply in the first five months of this year, according to Rystad. Russia is still the incumbent: last year, it made up 38% of Europe’s gas demand; its only competitors have been Qatar, Norway and Algeria traditionally. But the U.S. is a rising force: by 2018, annual LNG exports to Europe were a whopping 13 timeswhat they were in 2016, according to data from the U.S. Energy Information Administration (EIA). 

But the U.S. vs. Russia gas war has been gaining steam for some time, with the U.S. wading into the fray as recently as late May, when the Department of Energy touted LNG exports as “freedom gas”. 

The term looked like a not-so-subtle dig at Russia, coming not long after Secretary of Energy Rick Perry prodded a European sore spot: the region’s dependence on Russian energy exports, and internal tensions about whether it should deepen that relationship going forward. (Gas interruptions due to a dispute between Russia and Ukraine in the winter of 2006 cast a long shadow.)

Full story

Recent Popular Articles


We use cookies to help give you the best experience on our website. By continuing without changing your cookie settings, we assume you agree to this. Please read our privacy policy to find out more.